Yahoo Finance Aussie Dollar Rallies on GDP Numbers, with the BoC and the Loonie in Focus
Earlier in the Day:
Economic data released through the Asian session this morning was on the lighter side, with key stats limited to Australian 2nd quarter GDP numbers and China’s August service sector PMI.
For the Aussie Dollar, the economy grew by 0.9% in the 2nd quarter, quarter-on-quarter, which was better than a forecasted 0.7%, whilst easing from an upwardly revised 1.1% growth in the 1st quarter, according to figures released by the ABS.
Domestic demand increased by 0.6% for the quarter, the rise attributed to a 0.7% increase in household consumption, with expenditure on both discretionary and non-discretionary goods and services on the rise.
General government final consumption expenditure increased by 1%, with public investment remaining high, reflecting the continued work on infrastructure projects.
Investment in new dwellings increased by 3.6%, with the construction industry rising by 1.9%.
Compensation of employees grew by 0.7%, attributed to rises in the number of wage and salary earners and wage rates.
The household saving ration fell to 1%, its lowest rate since Dec-07, the fall coming as a result of tepid household income growth and strong household consumption.
Year-on-year, the economy grew by 3.4%, coming in well ahead of a forecasted 2.8%, whilst picking up from a 1st quarter 3.1%.
The Aussie Dollar moved from $0.71858 to $0.72145 upon release of the figures.
Out of China, the August service PMI fell from 52.8 to 51.5, falling well below a forecasted easing to 52.7.
The slower pace of growth left the composite PMI down for a 2nd month in a row, the composite falling from 52.3 to 52.0, a 5-month low.
Business activity at service companies increased at the weakest pace since Oct-17.
Total new business saw a modest rate of expansion, improving from July’s 31-month low.
The rate of payroll growth remained moderate, while service companies have continued to add to payrolls for 2-years.
Backlogs remained unchanged, following three consecutive months of decline.
Operating expenses rose at the quickest pace in 6-months, the rise attributed to rising prices for fuel and raw materials and higher staffing costs.
The pace of charge inflation was moderate.
While improving from the previous month, optimism remained below the long-run series average.
The numbers will be disappointing particularly as the Chinese government is looking towards the services sector to offset any fallout from the ongoing trade war with the U.S.
The Aussie Dollar moved from $0.72145 to $0.72041 upon release of the figures, before easing to 0.7204 at the time of writing, up 0.36% for the session, with negative sentiment towards trade seeing the Aussie Dollar ease back from a morning high $0.7218
Elsewhere, the Japanese Yen was down 0.10% to ¥111.52 against the U.S Dollar that has dominated, as trade war jitters continue to hit the markets, with the Kiwi Dollar down 0.09% to $0.6551, the risk off sentiment weighing on the Kiwi.
In the equity markets, it was a sea of red, with the Hang Seng and CSI300 down 0.97% and 0.66% respectively, and the Nikkei and ASX200 down 0.26% and by 0.74%.
Solid GDP numbers couldn’t save the ASX200, with fears of an extended trade war leaving the markets to take a forward look on corporate earnings and the global economy should the U.S fail to resolve disputes with Canada, China and the EU.
The Day Ahead:
For the EUR, economic data scheduled for release through the morning includes August service sector PMI numbers for Spain and Italy and finalized figures for France, Germany and the Eurozone. July retail sales figures out of the Eurozone will also be there for the markets to consider, which are forecasted to be negative for the EUR.
Outside of the data, focus will continue to be on trade and the Italian government, the combination of which could see the EUR cough up the morning’s gains later in the day should today’s stats fail to impress.
At the time of writing, the EUR was up 0.15% to $1.1599, with support kicking in as the Dollar coughs up some of Tuesday’s gains.
For the Pound, economic data is limited to the August service sector PMI, which could weigh heavily on the Pound should the numbers also disappoint, both construction and manufacturing PMIs reflecting slower growth in August.
Outside of the data, Brexit negotiations will also be there for the markets to keep an eye on, the Pound susceptible to another slide should there be any negative chatter.
At the time of writing, the Pound was up 0.1% to $1.2868, the gains coming off the back of some Dollar weakness early in the day.
Across the Pond, economic data is limited to July trade figures that are unlikely to have a material impact on the Dollar, though may well provide further support to Trump’s desire to rebalance the books.
Outside of the data, FOMC members Williams, Kashkari and Bostic are scheduled to speak, with any talk of a need to pause on rate hikes likely to weigh on the Dollar, a September move by the FED having been largely priced in, with economic indicators yet to reflect any adverse effects of the ongoing trade war on the U.S economy.
At the time of writing, the Dollar Spot Index was down 0.12% to 95.326.
For the Loonie, economic data scheduled for release this afternoon includes July’s trade data and 2nd quarter labour productivity numbers, the trade data likely to garner more interest as the Canadian government attempt to rescue NAFTA.
While the stats will provide direction, the Loonie will ultimately be in the hands of the Bank of Canada. With a hold on rates expected, the rate statement will be the key driver later today. The BoC was particularly hawkish last time around, setting the Loonie up for a slide should there be a material shift in sentiment, the markets expecting the BoC to continue suggesting a near-term hike.
At the time of writing, the Loonie was up 0.17% to C$1.3166 against the U.S Dollar, the BoC and trade talks the key drivers through the day.
This article was originally posted on FX Empire
