Australian Dollar Soft Despite Positive Macro Reports

The Australian dollar traded largely flat against its most-traded peers on Wednesday, though the Aussie fell against some of them. Macroeconomic data in Australia was good, and reports in China, Australia’s biggest trading partner, were better than expected. But that did not seem to help the Australian currency.
The Westpac-Melbourne Institute Index of Consumer Sentiment rose by 2.6% in March after gaining by 1.5% in February. The report pointed out that the index was just 0.2 points below the December level, which was the highest in a decade. The report explained the positive result by the following reasons:

The main factors driving the Index are improving economic conditions and prospects, both domestically and abroad, particularly as they relate to our labour market. Australia’s success in containing COVID-19, the promise of vaccine rollouts bringing an end to the pandemic, and support from stimulatory government policies have all contributed to the sustained lift.

China’s Consumer Price Index fell by 0.2% in February. While not a good result by itself, it was better than the market expectations of the same 0.3% rate of decline as in January. The Producer Price Index climbed by 1.7%, accelerating sharply from the previous month’s 0.3% gain. Markets were counting on a slightly smaller increase of 1.5%.
Philip Lowe, Governor at the Reserve Bank of Australia, was delivering a speech today. He was optimistic about the future of the Australian economy in the post-pandemic world, saying:

Last week we received further confirmation that the Australian economy is recovering well, and better than expected.

Nevertheless, he stated that it will take a long time before the central bank’s goals of achieving full employment and the inflation target are reached. Therefore, the Governor signaled that markets are wrong with their expectations of an interest rate hike in the relatively near future:

Over the past couple of weeks market pricing has implied an expectation of possible increases in the cash rate as early as late next year and then again in 2023. This is not an expectation that we share.

AUD/USD fell from 0.7716 to 0.7704 as of 9:09 GMT today, though the currency pair has rebounded from the daily low of 0.7669. EUR/AUD advanced from 1.5413 to 1.5444, and its daily high was at 1.5474. AUD/JPY traded at 83.75 after opening at 83.71 and falling to the session low of 83.48.
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Original from: www.earnforex.com