The Australian dollar rose 0.64% on Wednesday amid the release of solid growth figures for the first quarter. The better-than-expected GDP figures caught investors off guard as many were expecting the Australian economy to have suffered more during the first three months of the year. The gross national product rose 1.7% y/y compared to 1.6% median forecast. On a quarter-over-quarter basis, the economy grew 0.3% (seasonally adjusted).
Looking at the detail, the picture is not that rosy as consumer spending slowed down in the first quarter, capital expenditures were quite soft and mining inventories exploded. Today's figures were indeed good news, however the weakness seems to be broad based, suggesting that an acceleration in growth is more than unlikely.
The appreciation of the Aussie over the last week looks mad and we believe this is more due to the broad USD weakness rather than due to Australian fundamentals. Investors are looking for yields and the AUD is still an interesting alternative, especially against the backdrop of failing Trumponomics.
After rallying 2.5% since June 1st, AUD/USD is currently testing the 0.7556 resistance (high from May 2nd). A break of the latter would open the road toward the following resistance area at around 0.76. On the downside, a support lies at 0.7469 (Fibonacci 38.2% on May-June rally).
By Peter Rosenstreich