It is the optimism about the growth in year 2017, which has shrugged off the losses for the Aussie after its brutal GDP number. If you look at the county’s GDP, it has not contracted since March 2011. Thus, there was no surprise that we have seen such a reaction by traders when the GDP number was released. However, looking at the data for Q4, it is evidently clear that numbers are supporting the growth picture and we anticipate that the GDP growth may bounce back when the number will be released.
Going into 2017, the key is to keep a close eye on the Chinese economy which has a major infl uence on the Australian economy. This is the primary risk and if Chinese economy shows any signs of derailing, all bets will be off once again and no matter what the data will print over in Australia, investors will be looking at the bigger picture and this will impact the price of Aussie against a basket of currencies.
Given that commodity prices have a massive run since the US election and global risk appetite has improved massively, we do anticipate that the growth is skewed towards the upside. Growth would be spurred if the metal and commodity prices continue to surge. We expect them to move higher since Donald Trump has promised a massive fi scal spending. This could have spill over effects on the Australian business confi dence and increase the hiring numbers in the full time employment environment. At the same time, we would expect headwinds for investment for the mining sector may also ease and this could support the GDP.
At the same time, we have the Fed who are looking to tighten their monetary policy and another rate hike during the month of December is very much a done deal. The future path of the US interest rate hike would be important going forward and it is in this context the move could be interesting for the AUDUSD pair.
We do not expect the Fed to be aggressive with respect to their rate hike strategy and this may play a more upbeat note for the Aussie. As long as the RBA does not trigger any rate cut, we think that the Aussie may actually recover some more lost ground.