How a GDP Announcement Can Boost a Currency

Forex Trading: How a GDP Announcement Can Boost a Currency

The Australian GDP announcement for the second quarter of 2012 showed that the Australian economy grew much more than expected. The economy grew 1.3%, compared to official estimates of a 0.5% growth. After a month of pessimistic economic news for Australia and in the wake of further interest rate cuts, such a result came as welcome news for the nation and sparked activity in forex trading.

The Australian Dollar (AUD) rallied in many of its denominated currency pairs, showing particularly strong gains against the US Dollar (USD).

The AUD has staged a recovery in forex trading ever since the unexpected half-point interest rate cut made by the RBA on May 1. The encouraging GDP figures account for the last spike seen in the graph above, showing a strengthening AUD despite the RBA cutting the rate by a further quarter-point at the start of June.

Fittingly for forex trading and currency pairs, there are always two sides to every coin. Just as the AUD strengthened on the back of the GDP announcement, the USD has almost simultaneously weakened after economic data released by the US Bureau of Labour. US non-farm payroll figures, a key economic indicator for the country released on June 1, showed growth in the employment sector that was far below national estimates. What this has served to do is strengthen the calls for another round of quantitative easing, which in the short term would devalue the USD due to its inflationary effect. Such a move could spark further movement in forex trading against the USD, and possibly towards the Aussie.

It is important to see how a GDP announcement and other economic news can influence a currency pair. You can keep track of all the latest forex trading developments with IG Markets. They provide a dedicated forex focus, which keeps track of all the recent movement in the major currency pairs, as well as an extensive collection of analysis and frequent market updates. You can find the forex focus by clicking this link.

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