AUD/USD Analysis: Australian Dollar Points Higher Following Strong Q1 GDP Data

• Australian Q1 GDP grows by 1.1% YoY, vs. expectations of 0.6%, previous reading of -1.1%

• AUD/USD consolidates between 0.7700 and 0.7800, next big move may come around June FOMC meeting

• Reserve Bank of Australia maintained the cash rate at 0.1%, prolonging period of “easy monetary policy”

Australian GDP growth for Q1 surpassed expectations, coming in at 1.1% YoY vs. an expected print of 0.6%. Quarter over quarter growth also beat estimates, coming in at 1.8%. The strong print is sure to reignite Australian Dollar bulls to push back toward the yearly high of 0.8007. There were some concerns that the Australian recovery may have been slowing as the Reserve Bank of Australia (RBA) failed to make any changes to its policy slate during its June 1 meeting. The strong print, coupled recent USD weakness, may be enough to push AUD/USD higher towards 0.7800.

The Reserve Bank of Australia made no changes to its policy stance during its June 1 meeting, despite widespread rumors that the RBA may follow the Bank of Canada and Reserve Bank of New Zealand and strike a more hawkish tone. The RBA remained dovish, maintaining the cash rate at 0.1%, citing a need for employment and inflation metrics to meet longstanding targets. RBA Governor Philip Lowe reminded the public that there is a large amount of uncertainty still surrounding the country regarding potential outbreaks of new COVID variants.

The Australian Dollar has consolidated of late, effectively trading between 0.7700 and 0.7800 for most of May. Optimism surrounding the Australian recovery will continue to battle against an extremely dovish RBA, keeping the pair rangebound in the shorter term. The RBA remains committed to “maintaining highly supportive monetary conditions” until the central banks inflation and employment targets are met. AUD/USD may continue to struggle in the coming sessions as traders will begin to look to the June FOMC meeting for any hint at a potential taper in Fed asset purchases. Taper talk may continue to dominate the markets in the weeks ahead, and it has the potential to keep AUD/USD rangebound for the time being.

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