AUD/USD slides on weak Australian data, GDP nextThe Australian dollar continues to swing sharply this week. AUD/USD is trading at 0.6641 in the North American session, down 0.71% on the day. The downswing has wiped out the Aussie’s gains of 0.55% on Monday.
Australia posted weak data earlier today, which has weighed on the Australian dollar. Corporate profits declined 2.5% q/q in the first quarter after revised growth of 7.1% in the fourth quarter. This was well short of the market estimate of -0.9%. On an annualized basis, corporate profits plunged 8.6%, marking a fourth straight quarter of contraction.
Australia also posted a current account deficit of AUD 4.9 billion in the first quarter, after a revised surplus of AUD 2.7 billion in Q4 2023. This missed the market estimate of a surplus of AUD 5.9 billion. The trade surplus fell as imports rose and exports declined, as metal ore prices fell. Today’s silver lining was an improvement in retail sales, which rebounded with a small gain of 0.1% m/m in April, after a -0.4% reading in March
Australia’s GDP is expected to fall to 1.2% y/y in the fourth quarter, compared to 1.5% in the fourth quarter of 2023. GDP is expected to show weak growth of 0.2% q/q in the first quarter, unchanged from Q4 2023. Consumer spending has been soft as consumers grapple with high interest rates and stubborn inflation.
The March GDP data is expected to indicate that Australia narrowly avoided a recession. Normally, such an economic landscape would likely result in the Reserve Bank of Australia lowering rates in order to kick-start the limping economy. However, with inflation stickier than anticipated, the RBA is likely to wait before easing up on interest rates and hasn’t ruled out rate hikes in order to keep a lid on inflation. The RBA meets next on June 18th.
AUD/USD is testing support at 0.6641. Below, there is support at 0.6603
0.6692 and 0.6730 are the next resistance lines
