Australian dollar boosted by GDP data

The dollar continued its week-long rally today supported by news of stronger-than-expected economic growth in the first quarter.

The Australian dollar continued its week-long rally today supported by news of stronger-than-expected economic growth in the first quarter.

At 5pm (AEDT), the Australian dollar was trading at US77.95c, compared with US77c at the same time yesterday.

The economy grew by 0.9 per cent in the first quarter from the fourth, and by 2.3 per cent from a year earlier, a government report showed. Economists had expected 0.7 per cent on-quarter growth and a 2.1 per cent on-year increase. Quarter-over-quarter growth in the fourth quarter was unrevised at 0.5 per cent.

Economists said rising export volumes, emerging strength in consumer spending and a housing construction boom helped boost growth.

But mining investment remains weak, while commodity prices have slumped sharply, a recipe for weak growth over the next year.

“That result was slightly above market expectations but the make up of the growth indicates a very disappointing result,” said Andrew Hanlan, chief economist at Westpac.

Still, currency traders welcomed the solid growth numbers, which came just a day after the Reserve Bank of Australia surprised markets by omitting an easing bias from its latest policy statement.

The RBA kept its cash rate steady at a record-low 2 per cent, but most market participants were expecting governor Glenn Stevens to point to the central bank’s scope to cut again.

“The Australian dollar has been unstoppable in the last few trading sessions,” said Chris Tedder, market strategist, at FOREX.com.

“The RBA provided the fuel the Australian dollar needed to get it off the ground and widespread US dollar weakness kept it aloft.”