The Australian dollar remained firm today, being one of the strongest currencies on the Forex market, second only to the New Zealand dollar. The Australian central bank released its economic projections on Friday. While they were pessimistic in the short term, over the longer term the projections were fairly positive.
The Reserve Bank of Australia released the Statement on the Monetary Policy today. As part of the release, the RBA provided updated economic projections. The country’s gross domestic product is expected to contract 6% by the end of 2020 but only to expand at the same rate by the end of the next year. The unemployment rate is expected to peak at 10% in June and start falling gradually afterward, declining to 6.5% after two years. Headline inflation is expected to be very volatile, falling to -1% in June 2020, climbing to 2.75% in a year, but falling to 1.25% by the end of 2021. On the other hand, trimmed mean inflation is expected to be stable in the range of 1.25%-1.5%.
The relatively positive economic forecast was beneficial to the Aussie. The currency also got a boost from the optimistic market sentiment. It looked like the United States and China made good progress in trade talks, and that made market participants less nervous and more willing to acquire riskier currencies, like the Australian dollar. News related to China is especially important for the Australian currency because the Asian nation is Australia’s biggest trading partner.
AUD/USD rose from 0.6493 to 0.6519 as of 11:57 GMT today, reaching the high of 0.6548 intraday. EUR/AUD declined from 1.6674 to 1.6623, and its daily low was at 1.6572. AUD/JPY was up from 68.99 to 69.34, with the session maximum being at 69.61. At the same time, AUD/NZD dropped from 1.0667 to 1.0632, retreating from the session high of 1.0687.
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Australian Dollar Remains Strong After Economic Forecast
