AUD/USD: Bid above 0.70 despite RBA SoMP downgrading growth and inflation outlook

• AUD/USD is reporting gains above 0.70 at press time.
• The AUD is flashing green despite the downward revision of the growth forecasts by the RBA.  
• Aussie growth slowdown priced in by markets.  

The AUD/USD pair continues to trade in green even though the Reserve Bank of Australia (RBA), in its latest Statement of Monetary Policy (SoMP), downgraded Australia’s growth and inflation outlook.  

The central bank has cut June 2019 gross domestic product (GDP) forecast by 0.75 percentage points to 1.75%. The economy is seen expanding by 2.75% in  December 2019 and December 2020.

Further, the trimmed mean inflation is seen rising by 1.5% in June 2019 and 1.75% in December 2019. The inflation is seen ticking higher to 2% in December 2020 and June 2021.  

The SoMP said that forecasts are based on the technical assumption that official interest rates would be cut by 50 basis points as expected by markets.  

That Australian economy has slowed down considerably over the last few quarters is generally accepted by now. Further, markets seem to have priced-in RBA rate cuts. As a result, the downward revision of growth forecasts by the RBA has failed to weaken the bid tone around the AUD.  

As of writing, AUD/USD is trading at a session high of 0.7006, having hit a low of 0.6978 earlier today. The gains, however, could be short-lived, if the US-China trade negotiations fail to save the trade deal.  

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