Australian Dollar Forecast: Dovish RBA to Counterbalance Robust Chinese GDP Print

Australian Dollar Forecast: Dovish RBA to Counterbalance Robust Chinese GDP Print

But, robust Chinese economic statistics may restrict the money's potential downside, with Q1 GDP expected to fortify the country's strong rally in output.


DOVISH RBA, VACCINE CONCERNS TO WEIGH ON AUD

The risk-sensitive Australian Dollar will continue to get rid of ground against its haven-associated counterparts in the week ahead despite the prospect of robust Chinese first-quarter GDP figures, as the Reserve Bank of Australia's semi-annual Financial Stability Review shows growing threats to the local economy.

The central bank warned that insecure behaviour from overly-optimistic investors could induce asset prices over their basic values and lead to debt levels to assemble, exposing those assets into a large correction which"would expose lenders to large losses on the greater debt, especially if the quality of that debt was eroded".

On the other hand, the RBA downplayed the recent rise in housing costs as a threat to monetary stability, as it hadn't been accompanied by a notable build up in debt. House prices soared by the largest amount since 1988, '' on a monthly basis -- in March, as record low interest rates and affordable mortgages continues to fuel requirement.

This commentary suggests that the central bank will retain its dovish fiscal policy position for the foreseeable future. Truly, Governor Phillip Lowe has said that the lender could roll over the November 2024 bond from the April 2024 bond for its YCC goal in the coming months, and reiterated that"the lender is ready to undertake additional bond purchases if doing this would assist with progress towards the goals of full employment and inflation".

Compounding the downside pressure on the local money is that the awkward rollout of coronavirus vaccines to the public, with just 1.07 million doses administered as of April 7. That is far short of the four million doses projected to have been sent by now, and also the rate of inoculations is not likely to pick up given the recent warnings regarding AstraZeneca's shot.

Prime Minister Scott Morrison said the AZ vaccine would no longer be recommended for under-50's because of possible links to a rare blood clotting disease, all but ruling out the possibility that many Australians will have obtained their first shot by October.

CHINESE Q1 GDP IN FOCUS

Looking forward, upcoming jobs numbers for March and robust Chinese economic data may restrict AUD's potential drawback. Even the local jobless rate is predicted to drop 0.1percent in March to 5.8percent howeverthis is unlikely to have a remarkable effect on the RBA's prognosis moving forward considering that the JobKeeper program expired in the tail-end of past month. Treasury forecasts the cessation of this application could ultimately lead to the loss of over 150,000 jobs and determine the unemployment rate rise to 7 percent.

Signs of financial strength from China may help stem the Aussie's slip reduced, together with Australia's largest trading partner's market expected to expand from double digits in the first quarter. Nevertheless, deteriorating fundamentals locally may continue to discount AUD contrary to its lower-beta counterparts in the near term.

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