Key Takeaways:
Australian dollar weakened after soft GDP data
Increased bets on earlier interest rate cuts by RBA- GDP growth below expectations, driven by weak private spending
- Weak GDP data leads to expectations of earlier interest rate cut by RBA
China’s economic troubles and US-China trade war fears affecting Aussie
USD bulls cautious ahead of Powell’s speech, aiding AUD/USD support
Recovery above 0.6500 could face resistance, bullish bias potential
ASX 200 retreats after reaching record levels, down 0.6%
Commonwealth Bank pauses plans to charge $3 fee for branch cash withdrawals- Below-average growth in Australian economy influenced by interest rates, living costs, global uncertainty
Australian Economy Facing Challenges Amidst Weak GDP Data and Rate Cut Expectations
The Australian economy recently faced challenges as the Australian dollar weakened following soft GDP data. The GDP growth for the third quarter fell below expectations, primarily driven by weak private spending. This disappointing performance has raised concerns and increased bets on the Reserve Bank of Australia (RBA) implementing earlier interest rate cuts.
Speculation on the RBA easing its policy sooner than expected has been fueled by missed GDP forecasts and suggestions from various financial institutions. ANZ and Westpac anticipate the RBA to begin rate cuts by May 2025 while Capital Economics predicts the central bank to start its easing cycle in the second quarter of the same year.
Despite recent signs of sticky inflation, the GDP data reveals a different picture, with consumer inflation remaining above the target range. The RBA predicts slow GDP growth, and it is unlikely to reach 1.5% by 2024 according to recent reports.
The global economic landscape, especially concerning China’s economic troubles and the ongoing US-China trade war, has also impacted the Australian economy. With the Australian dollar facing selling pressure and uncertainties in the global market, the path forward for the Australian economy remains challenging. Investors and market participants are closely watching for any developments that could further impact the economy’s performance in the coming months.