The Australian dollar slipped to near 0.7125 against the US dollar despite stronger-than-expected GDP data from Australia, according to Brown Brothers Harriman analyst Elias Haddad. Australia’s second quarter GDP grew 0.4% quarter-on-quarter and 2.1% year-on-year, surpassing market forecasts. However, the positive domestic economic performance was insufficient to prevent the Aussie’s decline as broad-based US dollar strength dominated currency markets.
The divergence between solid Australian economic fundamentals and the AUD’s price action highlights the overwhelming influence of greenback demand across global foreign exchange markets. Traders are currently seeing the US dollar overpower individual currency dynamics, even when supported by favorable data releases. The carry trade characteristics that typically support the Australian dollar are being temporarily suppressed by the stronger dollar narrative.
FXnCO Insight
AUD/USD traders should watch for any reversal in broad dollar strength as a trigger to capitalize on Australia’s underlying economic resilience and favorable carry positioning.
Source: FXStreet