Economic Insights
Australia’s Gross Domestic Product (GDP) grows 3.1% YoY
Australia’s economy expanded last quarter, driven by exports –especially iron ore exports to China due to large infrastructure investments in 4Q. It rose 0.6% QoQ, and 3.1% YoY in the last quarter.
Source: Bloomberg
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2012’s pace is the fastest after the 2008 crisis, since resource investment and exports to China picked up. Moving forward, Reserve Bank of Australia (RBA) Governor Glenn Stevens mentioned that the chance of a rate cut is much higher than a rate increase. Thus, the dovish move from the RBA pushed the AXS 200 higher.
Source: Bloomberg
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Data released earlier shows that exports contributed a 0.7% growth to 4Q GDP, which beat forecast. Exports in 4Q grew 3.3%, while household spending and public spending rose sharply as well.
The 4Q GDP report definitely meets expectation, however, construction still lagged. Non-dwelling construction slumped 8.9%, negatively affecting 0.8% of GDP growth.
The Aussie climbed toward the 1.03 level against the Greenback after the GDP releases, since the solid figure eliminates some bets in the market that the central bank will cut the Official Cash Rate (OCR) again in its next meeting.
Dow reaches another high as Institute for Supply Management (ISM) service climbs
The U.S. service sector continues expanding quickly as the ISM non-manufacturing index rose to 56 in February from 55.2 in January. Strong house sales largely benefitted the service sector, as improving housing demand benefits related service sectors. Thus, service orders increased.
The Dow Jones closed 0.9% higher towards another new high at 14,253.77 with strong momentum from the service sector. The U.S. equity market seems to ignore the sequester again, much like the fiscal cliff three months ago.
Source: Bloomberg
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Investment Insights
Long AXS 200, with short AUDUSD hedge
The Aussie seems capped somewhere with the close monitoring of the RBA. However, the AXS 200 looks attractive from the global economy’s gradual improvement and ultra loose RBA monetary policy.
The AXS 200’s coming support is at 5036.60, and AUDUSD’s coming resistance at 1.0350.
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