AUD/USD Slumps as US Economy Expands Faster than Expected in Q4
The Australian Dollar US Dollar (AUD/USD) exchange rate found itself tending lower overnight on Wednesday as investors reacted to the latest US GDP figures.
At the time of writing AUD/USD is down 0.3%, with the pairing close to striking a new four-month low.
US Dollar (USD) Firm in Run up to Expected Fed Rate Hike
The US Dollar pushed higher against the Australian Dollar during the US trading session on Wednesday in the wake of some upbeat US GDP figures.
According to data published by the US Bureau of Economic Analysis the final estimate for US GDP in the fourth quarter saw growth revised to 2.9%, up from 2.5% in the previous estimate and beating market expectations it would only strike 2.7%.
While this was still a slowdown from the previous quarter’s rise of 3.2% it was still enough to trigger an uptick in the USD exchange rate.
Analysts suggest that the upbeat figures may also reignite the conversation over the pace of rate hikes that the Federal Reserve may sanction this year.
Dennis de Jong, managing director at UFX.com, said;
‘Robust jobs growth and healthy consumer spending have been attributed to today’s stronger than expected US GDP data, as the country’s economic outlook appears in rude health and the 3% growth target appears within touching distance.
…As a result of the strong economic outlook, questions may be raised around the possibility of Fed Chair Jerome Powell introducing a June rate hike.’
Meanwhile the Australian Dollar struggled in trade on Thursday as fears over a possible trade war between the US and China flared once again.
Bloomberg reported that the US government was mulling over plans to curtail Chinese investment in the US, a move that investors fear will escalate trade tensions and led to a marked fall in market risk sentiment.
AUD/USD Forecast: US Inflation to hold Steady?
Looking ahead the AUD/USD exchange rate could face further pressure on Thursday with the release of the Federal Reserve’s preferred measure of inflation.
Economists forecast that February’s PCE Price Index will have held steady at 0.4%, with the robust reading of inflation possibly leading to further speculation on the possibility of a June rate hike from the Fed.
Meanwhile the Australian Dollar is likely to find limited movement on expectations that Thursday’s Private Sector Credit figures will show that credit growth will have held at 0.3% last month.