AUS
NZ
UK
CA
USA
FRA
GER
ESP
ITA
NLD
PRT
SWE
GRC
IND
POL
BRA
ZAF
RUS
CHN
UAE
Highlights
- Australian dollar dips to a four-month low after weak economic data.
- GDP report impacts interest rate expectations by the Reserve Bank.
- Markets shift probability for the Reserve Bank's rate cut to April.
The Australian dollar faced a sharp decline on Wednesday, hitting a four-month low following weaker-than-expected economic growth data for the third quarter. The currency was trading at US64.05¢, extending its losses into the afternoon. By mid-day, it recorded a dip of 1.1 per cent, settling at US64.16¢. This significant drop reflected the broader market sentiment on the country’s economic outlook.
Data released earlier showed that the Australian economy grew by a subdued 0.3 per cent in the third quarter, falling short of market forecasts. This underwhelming performance weighed heavily on the local currency, signaling potential challenges for the broader economy. The weaker growth data prompted financial markets to adjust their expectations regarding the Reserve Bank of Australia’s (RBA) monetary policy moves.
Markets are now anticipating an earlier interest rate cut by the Reserve Bank, pulling forward the expected timing from May to April. Additionally, they have increased the likelihood of a cut in February to 50 per cent, compared to the 28 per cent probability assigned before the GDP report. Markets remain firmly priced for a subsequent quarter-point easing by July, indicating expectations for continued monetary easing to support economic recovery.
Traders also adjusted their stance for the RBA’s upcoming policy meeting. The probability of a rate cut in the meeting scheduled next week rose slightly to 15 per cent, up from 9 per cent prior to the release of the economic data. These shifts highlight the impact of the GDP report on market perceptions and investor sentiment.
Economists noted that while the GDP data was generally aligned with the RBA's forecasts, it underscored persistent challenges in the Australian economy. Christian Baylis, co-founder of Fortlake Asset Management, stated that the report offered a modest growth figure but remained within the Reserve Bank’s expectations, implying no immediate changes in the broader monetary policy outlook.
The recent developments are likely to keep financial markets focused on upcoming economic indicators and RBA policy announcements. These shifts in market expectations underline the significance of weak economic growth data in shaping monetary decisions and currency movements.
