AUD/USD May Fall Down Under Amid The RBA, GDP

This was the week: Strong USD, mixed China, trade, and more

With very few Australian figures, China dominated the scene. At first, the official Chinese Manufacturing PMI missed expectations with 49.2 points, weighing on risk sentiment and the Aussie. China is Australia’s No. 1 trade partner. However, the independent Caixin Manufacturing PMI beat projections with 49.9 points, helping the Aussie recover. The independent number does not surpass the government figure very often.

China remained in the news also due to trade talks. As expected, Trump extended the deadline for imposing new tariffs on the world’s second-largest economy, allowing more time for talks. While his Economic Adviser Larry Kudlow saw a historic deal in the making, Trade Representative Robert Lighthizer said that buying US goods is not enough for a deal: structural changes are needed. It may still take some time.

The greenback got a boost from upbeat GDP figures. At 2.6%, markets are much calmer and the effect of a stronger USD was countered by a risk on sentiment that helped the Aussie. However, the Manufacturing PMI fell short of expectations with 54.2 points, casting doubts about the strength of the economy.

The failed second summit between the US and North Korean leaders Trump and Kim had a short-lived adverse impact on AUD/USD.

Australian events: RBA, GDP, Retail Sales

Australian housing figures kick off the week in Australia. The recent plunges in building permits and new home sales are of growing concern. They serve as a warm up to the main event on Tuesday.

The Reserve Bank of Australia left the interest rate unchanged at 1.75% since mid=2016 and in the last rate decision in February, also refrained from altering the text of the statement. However, Governor Phillip Lowe and the Statement of Monetary Policy (SOMP) both sent a new message: the next move in rates may be up or down rather than up. The A$ suffered as a result.

Will the new message be reflected in the fresh statement? This is the critical question for this rate decision and everything can happen. Lowe will speak on the other side of the day.

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