AUD/JPY rebounds from 3-week low, Australian GDP growth slowest in 1 year

Having taken a hit after the Reserve Bank of Australia’s latest policy decision on Tuesday, the Australian Dollar recouped part of the losses on Wednesday, with the AUD/JPY pair advancing almost 0.5%.

Meanwhile, market players wagered interest rates would be heading lower in 2024. The chances of another RBA rate hike are now seen at 10%, down from 44% previously. That shift came after a surprisingly soft US job openings report and after an ECB official opened the door to early rate cuts.

The most recent GDP data coming out of Australia also supported the dovish outlook. Australia’s economy grew at a quarterly rate of just 0.2% in Q3, decelerating from a 0.4% expansion in the second quarter.

It has been the weakest growth rate since Q3 of 2022, as fixed investment rose at a softer pace compared to the second quarter and household consumption stalled.

Fixed investment rose mostly due to a stronger growth in public investment, 8.9% in Q3.

Household consumption registered no growth, weighed down by rising interest rates and tax payments. The household savings ratio plummeted to 1.1% in Q3, or the lowest since Q4 of 2007, from a revised down level of 2.8% in the second quarter.

“The low level of the savings rate suggests that consumers may soon feel inclined to tighten their belts,” Marcel Thieliant, head of Asia-Pacific economics at Capital Economics, was quoted as saying by Reuters.

“The upshot is that the RBA is now done tightening and we’re sticking to our forecast that it will lower interest rates in the second quarter of next year, earlier than most anticipate.”

As of 8:28 GMT on Wednesday AUD/JPY was edging up 0.44% to trade at 96.823. Yesterday the minor Forex pair went down as low as 96.265. The latter has been the pair’s weakest level since November 13th (96.186).