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Aussie Steadies Ahead of GDP

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Aussie Steadies Ahead of GDP

The Australian dollar was trading steady against its US counterpart, as economists revised their outlook on Australia’s first quarter GDP growth.

The AUDUSD was trading at 0.9253, advancing 0.08 percent. The pair reached an intraday high of 0.9286. The daily chart shows initial support at 0.9213 and resistance at 0.9296. The pair is trading below the 50-day average of 0.9258, where the bias is neutral.

The AUDNZD surged on Tuesday, climbing 0.46 percent to 1.0989. The daily chart shows initial support at 1.0919, with 1.1004 as the next resistance.

Declining inventories are expected to weigh on Australia’s next batch of GDP figures, scheduled for release on Wednesday. Business inventories declined 1.7 percent in the first quarter, the Australian Bureau of Statistics reported on Monday. Company gross operating profits rose 3.1 percent in the first quarter, Monday’s report showed. Economists forecast a gain of only 2 percent.

Lower inventory numbers are expected to have a negative impact on first quarter GDP figures. According to economists, the lower inventory numbers could shave 0.5 percentage points from the first quarter figure.

Citigroup has lowered its quarterly estimate of Australian GDP from 0.9 percent to 0.6 percent. This translates into a year-on-year growth rate of 2.9 percent.

ANZ senior economist Justin Fabio said his bank will revise its first quarter GDP estimate to account for the lower inventory numbers.

UBS said it will keep its estimate at 0.7 percent, although the latest figures remove the possibility of upside.

A median estimate of economists is calling for a quarterly gain of 0.8 percent, according to a recent survey conducted by the Australian Associated Press. Year-on-year, economists forecast a rate of 3.1 percent.

On Monday the Australian Bureau of Statistics said building permits declined 5.6 percent in April, following a decline of 4.8 percent the prior month. Year-on-year, permits were up 1.1 percent, following a 20.9 percent hike in March.

On Tuesday the ABS said retail sales rose 0.2 percent in April, in line with forecasts.

The Reserve Bank of Australia decided on Tuesday to keep its benchmark interest rate unchanged at 2.5 percent, as policymakers played down the possibility of a rate hike in the near future. RBA Governor Glenn Stevens said the bank would seek a “period of stability” to encourage growth. Australia’s economy faces several obstacles this year, as the government looks to balance the budget.

The government’s latest economic blueprint, released last month, will place considerable pressure on households as policymakers seek to cut the country’s budget deficit in half over the next year. Spending cuts are expected to result in thousands of job losses and contribute to a higher unemployment rate. The Australian government forecasts unemployment to rise to 6.25 percent and stay there until the middle of 2016.

Australia’s unemployment rate is currently at 5.8 percent.

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