Australian Economy Down but Not Out as Q1 GDP Surges

(eToro Blog) A day after Australia’s Reserve Bank cut its benchmark interest rate by 25 basis points, the Australian Bureau of Statistics reported today an unexpected but welcome improvement in the country’s first quarter growth. According to the report GDP on a quarter-over-quarter basis rose 1.3%, well above the consensus call for 0.5%. Meanwhile on a year-over-year basis, and at the fastest pace in at least four years, GDP rose to 4.3% in the first quarter, as compared to 2.3% in the first quarter of 2011, against expectations of 3.2%.

On OpenBook, sentiment for the AUD/USD pair is nearly evenly split between bulls and bears. Following the GDP news, the Aussie Dollar surged and was trading recently at 0.9854, a gain of 1.11%, and quite a few traders including some gurus were caught by surprise. OpenBook guru Rowaihy, who allocates the majority of his portfolio to the AUD/USD, may have been caught unaware but the guru has been steadfastly bearish over at least the past several weeks. He will undoubtedly prefer to ride out the bull wave until the momentum swings back in his favor, and given that the underlying fundamentals support the downtrend, his wait may not be too long.

Trader KENT1668 has been profitably working both sides of the AUD/USD pair, first capturing a 37.60% profit on a long, then an 11.00% profit on a short, and back to a 13.00% profit on another long and one short position opened earlier today is already showing a 3.00% gain.

OpenBook trader spacealfa71 from Italy snagged a string of quick profits earlier, capturing a 16%, 8%, 10% and 40% profit on each of four short positions that were opened and closed within 90 minutes.

Markets had already been pricing in the possibility of a similar rate cut by the RBA next month, given the perceived weakness in the Australian economy and the repercussions of China’s slowdown. This latest news gives the RBA some respite from the pressure for more easing but analysts caution that the while the RBA will appreciate the data it doesn’t negate that the outlook is clearly uncertain, if not somewhat hostile.

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