The Australian economy grew by 0.8% in Q4 2013, better than 0.7% expected. Year over year, the economy expanded by 2.8%, more than 2.5% predicted.
Nevertheless, the good news from this key figure was good enough for AUD/USD to reach 0.8996 before retreating. The composition of growth and worries about China weigh.
Australia still enjoys strong exports of resources, and this is growing. However, the future doesn’t look that bright: investment in mining is on the fall. In addition, public spending by the central and regional government is on the fall.
Is the currency weak enough to support the economy? Not perfectly so, and there’s a good reason the RBA re-introduced a phrase about the strength of the A$. Even at current rates, the terms of trade with China, Australia’s No. 1 trade partner, are not that positive.
There is fear that the recent downturn in the labor market could result in less consumption and curb any attempt to shift away from a dependence on mining.
China announced a 7.5% growth target for 2014 and a new focus on reforms. This might be positive in the long run for the global economy, but the hunger for resources, including those coming from Australia, might not be optimal for the land down under.
AUD/USD jumped in the immediate aftermath but couldn’t top the 0.90 line. Support lies at 0.8910.
For more lines, events and analysis, see the AUDUSD forecast.
