The Australian Dollar has rallied after the Reserve Bank of Australia held key interest rates at 2.50% and made no suggestions of further rate cuts. In addition Australian GDO came in at 0.6% for the second-quarter of 2013 which brought the annual figure up to 2.6% while the previous quarter was revised higher, but still in negative territory.
The GDP report pointed to Australian economic expansion in the first six months of the year which gives the RBA reason to hold rates steady with no need to cut interest rates further after it held rates steady yesterday. The Australian Dollar has now room to rally further with several headwinds out of the way.
Another tailwind for the AUDUSD currency pair is that the US Senate drafter a 90-day bi-partisan deadline in order to find a solution to how they will mishandle the Syrian situation which most likely will involve a military strike followed by a longer engagement which will further devalue the US Dollar and push the AUDUSD higher.
The Australian economy has proven to be a bit more resilient as the worst fears out there and the GDP figure reflects that. The Australian Dollar has been under pressure as institutional investors have shifted from record longs to record shorts on this currency and as always the correction has been stretched too far and too long.
The RBA has no reason to cut interest rates and GDP supports this scenario. Any sign of slightly better than expected news out of China will further give the Australian Dollar a boost. Look out for further rallies in Australian Dollar crosses as it is advisable to buy the dips going into the fourth-quarter.
Written by Paxforex