Immediately prior to last Friday’s announcement of Chinese gross domestic product figures the Australian dollar dropped to its lowest level in two weeks. However, China’s better than forecast growth data has seen the Australian currency rise.
Even though the Chinese pace of growth was at its slowest in three years, at 7.6 per cent in the second quarter of 2012, it still exceeded the market’s expectations, and this has had positive results for the Australian dollar.
The Chinese GDP data was released on Friday and the nation’s Permier Wen Jiabao admitted that there was currently little momentum behind economic recovery. Although Jiabao’s outlook was realistic, bordering on pessimistic, the Australian dollar still received a boost. Before the data release the dollar was trading at 101.58 US cents. After the data release there was a larger initial rise then what can now be seen, but it experienced a slight drop for no perceptible reason. Peter Dragicevich, Commonwealth Bank currency strategist, confirms this; ‘It was higher this morning, carried on from the move up we saw on Friday […] It’s moved down since then, but there’s no real catalyst for this.’ It has now risen to 102.22 US cents.
Dragicevich also expressed the belief that China’s economy could move into a stronger position later in the year: ‘momentum for a rebound hasn’t been established yet […] But we think that given the recent rate cuts, and the scope for more fiscal policy, it’s likely that we’ve seen the bottom of the Chinese cycle, and we should see its economy re-accelerate over the second half of the year.’
Today little relevant domestic data will be released, but tonight sees the International Monetary Fund announcing economic forecasts. The announcements will no doubt trigger new developments and the market will be watching.
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