The first quarter of 2017 once again saw the Australian economy growing. Despite the worse-than-expected decrease in the current account, the GDP growth in the first quarter averaged 0.3%, in line with the forecasts. The country took the lead from the Netherlands for the longest streak of uninterrupted economic growth, without any recessions –  GDP cuts for at least two consecutive quarters – observed for 26 years.

The report showed that the business sector performed the best, with business expectations growing to the highest level in nine years. This allows us to expect increased investment in the expansion of production, with further strengthening of the labour market and consumption growth in the country, backing the economic momentum. The Central Bank of Australia has maintained low lending conditions, despite fears of an overheated real estate market, as inflation in other sectors has still not reached the target level.

Stability issues with the Chinese economy, which is Australia’s main trading partner, also imposes restrictions on the pace of tightening by the RBA.

Compared with the same period last year, the GDP growth was 1.7%, reaching the lowest level for 8 years. A slowing growth of the economy does not allow for a rapid retreat from stimulus, despite the high consumer confidence reflected in the real estate booming. This is partly due to the cheap and affordable loans granted by the central bank.

The Australian dollar soared 0.5% to the highs reached in April, with ASX failing to hold up its position, closing with minuscular losses.

Defensive assets show a negative trend after a sharp recovery on Tuesday, as investors are waiting for details on the Middle East crisis, testimony of the FBI director James Comey and the decision of the ECB on Thursday. Investors are reducing bullish positions on the euro, while the British pound is stable. In our opinion, defensive assets still have the potential for growth. Given that Draghi will probably change the rhetoric by talking about the end of the period of low rates, gold may react with a decline, as this will mean a decrease in the yield of the asset for European investors.

Defensive assets saw a negative trend after a sharp recovery on Tuesday, as investors are waiting for details on the Middle East crisis, the testimony of the FBI director James Comey and the decision of the ECB on Thursday. Investors are reducing bullish positions on the euro, while the British pound is stable. Defensive assets might still have the potential to grow. Taking into consideration that Draghi might probably change his rhetoric, by talking about the end of the period of low rates, gold may react with a decline, as this will mean a decrease in the yield of the asset for European investors.

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