Disappointing Economic Data May Kill Off Aussie’s Recent Rebound
Australia’s recent economic data have been almost unanimously disappointing: GDP growth missed forecasts for the third quarter.
(Bloomberg) -- Australia’s dollar clawed back some lost ground last week amid optimism the U.S. and China are about to ink a phase-one trade deal. Its renaissance may prove short lived.
A trade ceasefire before the Dec. 15 deadline for more U.S. tariffs on China would almost certainly deliver another pop higher for the Aussie, but its long-term future is more likely to be determined by the outlook for the local economy -- and here the tea leaves are looking increasingly ugly.
Australia’s recent economic data have been almost unanimously disappointing: GDP growth missed forecasts for the third quarter, retail sales stalled in November, and capital expenditure extended its losing streak.
Consumer and business confidence figures this week may provide further evidence that economic headwinds are growing. If so, this would put more pressure on the Reserve Bank of Australia to keep cutting interest rates, and possibly dust off its roadmap for quantitative easing.
Technically the local currency is in an interesting moment. The tug-of-war between the various global and domestic uncertainties has seen the Aussie-U.S. dollar pair oscillate between 0.67 and 0.69 since the start of August. A major test of this range looks to be looming.
The pair’s 200-day moving average -- which has capped any rallies this year -- is steadily dropping into the trading range. Aussie bulls will be hoping positive trade news this week will be enough to propel the currency above the trendline. On the other hand, any failure would see the bear case looking stronger than ever.
The currency pair last tested support around 0.67 in early October when the RBA cut interest rates. If the domestic data continue to deteriorate, a more decisive move lower may be just around the corner.
Below are the key Asian economic data and events due this week:
- Monday, Dec. 9: New Zealand 3Q manufacturing activity volume, Japan current-account balance and 3Q GDP
- Tuesday, Dec. 10: RBA Lowe speaks, Australia NAB business confidence, China CPI and PPI, Philippine trade balance
- Wednesday, Dec. 11: Australia Westpac consumer confidence, New Zealand retail card spending, Japan PPI and 4Q BSI large manufacturing
- Thursday, Dec. 12: Australia consumer inflation expectations, BOJ Deputy Gov. Amamiya speaks, BSP rate decision, Singapore retail sales, Malaysia industrial production, India CPI and industrial production
- Friday, Dec. 13: New Zealand BusinessNZ manufacturing PMI, Japan industrial production and 4Q Tankan survey
To contact the reporter on this story: David Finnerty in Singapore at dfinnerty4@bloomberg.net
To contact the editors responsible for this story: Tan Hwee Ann at hatan@bloomberg.net, Nicholas Reynolds
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