The Australian dollar is higher against the US dollar on Wednesday.
The Aussie held onto its newly regained 0.65 handle after Australian consumer prices surged to the highest in 5-years.
US GDP contracted by -4.8% in Q1, the biggest drop since the 2008 financial crisis but the dollar mostly shrugged it off before the FOMC rate decision later.
AUD/USD was lower by 48 pips (+0.73%) to 0.6537 as of 5pm GMT.
The currency pair broke back through 0.65 in early trading before running into resistance at 0.654. The exchange rate rose 0.4% yesterday, giving a weekly return of +2.37%.
AUD: On course for sixth successive daily rise
The Aussie is on a tear on ever-building expectations that Australia will come out the other side of the crisis better than many other countries, including the United States. That means less much fewer fatalities from the virus, lower government debt, more people employed and a close proximity to China.
The durability of the Australian economy, which has gone over 30 years without a recession, was on display when consumer price inflation flew higher to 2.2% year-over-year, the highest since 2015.
Of course, with the country headed into a recession the prices are unlikely to hold up, but the pressure on the RBA to do more than it has already done will be lessened. The RBA started buying government bonds in its first quantitative easing program in March amid the market sell-off.
USD: Awaiting the Fed
Although down against the Aussie for a 6th consecutive day, the US dollar was generally mixed in a cautious lead up to the Federal Reserve monetary policy decision later today. That was even as US GDP data missed already very low expectations.
The size of the US economy shrank by 4.8% year-over-year in Q1 according to preliminary data released on Wednesday. It is the biggest decline since the fourth quarter of 2008 at the peak of the financial crisis. The GDP is unlikely to have affected the decision-making of central bankers who have already added unprecedented monetary stimulus and are likely to use this meeting to add some detail what’s already been done.
