SYDNEY: The Australian dollar held steady on Tuesday as investors chewed over an upbeat report on trade that indicated that local GDP data later this week was less likely to show an economic contraction.
China’s announcement of a new economic growth target delivered few surprises and the Aussie was flat at $0.6507 after having slipped 0.3% on Monday to an intraday low of $0.6508.
Support lies at around $0.6488, a bit above a three-month low of $0.6443 hit in mid-February. Resistance is at the 200-day moving average of $0.6562.
Australia’s current account surplus surged far beyond expectations in the December quarter, while net exports made a timely contribution of 0.6 percentage points to growth.
Separate data also showed a rise in government spending that offset a sharp drag from inventories.
The GDP report is due on Wednesday and there has been much speculation it would show the economy shrank as higher mortgage and tax payments squeeze incomes and spending. Westpac, which had expected a stalling in the fourth quarter growth, on Tuesday lifted its GDP forecast to a 0.3% expansion.
“The swing factors have been volatility in net export and total inventories, which together add around 0.2ppts, whereas we had expected a combined subtraction of around 0.2ppts,” Andrew Hanlan, an economist at Westpac, wrote in a note to clients.
Australian dollar braces for GDP test, China stimulus risk
“Domestic demand, on our figuring, is quite weak.”
Markets are, however, still confident that tightening by the Reserve Bank of Australia is over, but futures pricing suggests any rate relief won’t come until September.
News out of China’s National People’s Congress (NPC) showed Beijing sticking with an economic growth target of around 5% and a budget deficit of 3%, confirming no bazooka stimulus package is in the works.
The kiwi dollar was idling at $0.6091, after easing 0.3% overnight to as low as $0.6089.
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