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  • China’s first-quarter GDP drops more-than-expected. 
  • Both retail sales and industrial production contracted in March. 
  • The Aussie dollar, a proxy for China, is keeping gains despite dismal data. 
  • Markets seem to have priced in the economic downturn.

AUD/USD is unfazed by the weaker-than-expected China first-quarter gross domestic product (GDP) data released soon before press time. 

The world’s second-largest economy’s growth rate declined by 6.8% year-on-year in the first three months of 2020 versus expectations for a 6.5% contraction, having expanded by 6% in the fourth quarter of 2019. The quarter-on-quarter growth rate came in at -9.8% versus expectations for -9.9%

Meanwhile, consumer spending, as represented by Retail Sales, tanked 15.8% year-on-year in March compared to expectations for a 10% decline. Industrial Production also contracted by 1.1% but bettered estimates of a 7.3% drop. 

The dismal data has so far failed to move the needle in the Aussie dollar, leaving the AUD/USD pair largely unaffected near session highs at 0.6375.

The muted response isn’t surprising as the coronavirus-induced economic downturn is generally accepted by now and priced in. 

More importantly, risk assets and growth-linked currencies like the Aussie dollar are better bid on Friday, possibly on the back of STAT news report that Gilead Sciences’ experimental drug remdesivir is seeing rapid recoveries in fever and respiratory symptoms associated with coronavirus. 

Risk reset is also being supported by world leaders taking steps to gradually reopen their economies. AUD/USD could continue to gain altitude during the day ahead. 

Technical levels