On Friday US economic growth figures were revised down for the final quarter of 2013. The original estimate was for 3.2% but the new figures showed just 2.4%. Such a downgrade is worrying for global investors who are usually attracted to riskier currencies. Indeed, this is the major reason for the Australian Dollar weakness over the last few few days.
The severe winter experienced by the world’s leading economy could also hamper growth in the current quarter again leading to losses of confidence for the USD and in turn the Australian Dollar. Investors have chosen to sell off the Aussie and move funds into safe haven currencies and also bonds. Official figures down under also showed that Capital Expenditure dropped by 5.2% in December over 1% lower than predicted.
Early tomorrow morning Chinese PMI data is published and with Australia so heavily reliant on the Chinese any negative news could send GBPAUD rates in an upwards direction.
The interest decision by the Reserve Bank of Australia is due out on Tuesday and with last month signalling an end to the recent interest rate cutting cycle it is unlikely that we’ll see any change in interest rates. However, any post-meeting minutes could see a weakening for the Aussie if there is mention of interest rates being cut again in the future.
Personally, I think the RBA was rather hasty in announcing an end to their recent policy of cutting rates as the Australian economy is still clearly struggling.
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