On 8th March, AUD saw trading lows that haven’t been seen since January. Although there can be many reasons for this, many are citing the release of the Australian Gross Domestic Product figures that were very weak.
The 0.2% on-quarter growth noted in the last three months of 2018 is the lowest it’s been since the third quarter of 2016, as well as being below market expectations.
The housing market in Australia could be another reason as to why RBA lowers or cuts interest rates, which tend to have weighed heavy in relation to currency.
This has led economists to speculate that there will be two rate cuts in 2019, given that growth has come to a halt. These estimates state that there will be a 25-basis point reduction of the cash rate, being cut to 1.25% in July.
Another cut will follow in November taking the cash rate to 1% in November. This could put AUD under further pressure, as two cuts were unexpected.
There is still data to be released by RBA, such as housing data
AUD/USD Remains Defensive
The AUD/USD pairing has been defensive for a while, which can be attributed to the lack of growth and inflation forecast by the Reserve Bank of Australia, with GDP figures adding to the strain.
It is thought that the lows will be present for some time year, with future markets pricing in a further reduction for the end of 2019.
The lack of domestic economic data could mean that the news will leave its mark on the forecast.
Despite the bad news, there will be snapshots of business and consumer confidence mixed with theories surrounding inflation expectations. Although there could be positive fluctuations, the pair will continue to struggle due to a lack of monetary support.
Although there is a similar situation occurring with other currency, AUD seems to be especially vulnerable in comparison.
USD remains in a questionable position while decisions are made in relation to the trade deal with the US and China. The decision could sway the market, so short-term boosts may be expected.
The lack of news surrounding USD means that investors remain bullish when investing in AUD and any associated forex pairings.
GBP/AUD Nearing Possible Pivot Level
As well as AUD/USD remains a risky investment, GBP/AUD was at its lowest on March 11th, 2019 trading at 1.8456.
However, it’ not only the AUD news that has cast a shadow the current pair. This is due to the exposure Brexit has in the market, and its temperamental nature when it comes to decision-making.