- China’s GDP expands by 4.5%
- AUD/USD responds with gains
- RBA minutes indicate pause was a close call
- There is support at 0.6618 and 0.6526
- AUD/USD is testing resistance at 0.6711. Above, there is resistance at 0.6803
The Australian dollar is showing strong gains on Tuesday. In the European session, AUD/USD is trading at 0.6738, up 0.55% on the day.
Aussie rises as Chinese GDP outperforms
China is Australia’s largest trading partner, which means that the Australian dollar is very sensitive to Chinese economic data. The Asian giant powered ahead in the first quarter, as GDP expanded by 4.5% y/y, above the estimate of 4.0% and up from 2.9% in Q4 2022. The economy grew by 2.2% q/q, up from zero in Q4 2022 and matching the estimate. The solid release has propelled the Aussie higher.
In a dramatic shift in December, China abandoned its strict zero-Covid policy and the economy has expanded, although growth has been uneven. The driver behind the strong GDP data was retail sales for March, which soared by 10.6%, up from 3.5% in February and blowing past the estimate of 7.4%. Industrial production and fixed asset investment missed expectations and the property market is yet to recover from a historic downturn. It will take time for China’s economy to bounce back, but with Covid restrictions hopefully laid to rest, China’s resurgence bodes well for Australia and the global economy.
RBA considered rate hike in April
The Reserve Bank of Australia minutes, released on Tuesday, indicated that the decision to pause rates was close. Members noted that consumer demand had eased, but stressed that the Bank would reassess the need for further tightening based on inflation and employment and other key data as well as updated forecasts. The Bank’s stance is one of “conditional pauses” and the April pause should not be taken as a sign that the Bank won’t tighten further if the economy remains too hot for the RBA’s liking. The odds of another pause in May are 81%, according to RBA Tracker, still high but down from 94% last week.
