AUD: Domestic economy remains only a background factor - Westpac

In last Tuesday’s statement, the RBA dropped its reference to GDP growth averaging year >3%, lowering the bar to 2018 being faster than 2017 and given that 2017 year-average growth was just 2.3%, it shouldn’t need much luck, according to Sean Callow, Research Analyst at Westpac.  

Key Quotes

“Domestic growth finished 2017 with some momentum, with the Q4 national accounts revising up household spending sharply. Exports are already looking better in 2018, with Jan showing a 4% gain.”

“But the domestic economy remains only a background factor for AUD/USD near term. The pair looks stretched versus fair value, with commodity prices rangebound and yield spreads grinding in USD’s favour. Deepening trade tensions could open up sub-0.77 but mixed sentiment seems more likely, leaving the pair mostly low 0.77s to high 0.78s.”