Q2 GDP growth ahead of estimates
Growth in the Australian economy accelerated in the second quarter, rising 3.4% from a year earlier, confounding economists’ estimates of a slowdown to 2.8%. On a quarterly basis, growth did slow from 1.0% q/q in Q1 to 0.9% in Q2, but again beat forecasts of a drop to 0.7%.
Household expenditure accounted for more than half of the growth as household drew on savings to fuel spending. In the statement accompanying the no-change announcement at yesterday’s central bank rate meeting, the RBA stated that it expects GDP growth to average a bit over 3% in 2018 and 2019
The numbers caught the market by surprise and AUD/USD jumped 30 pips to 0.7215. The pair is currently consolidating just below the 0.72 handle at 0.7195. Today’s up-day raises the prospect of bullish divergence unfolding with stochastics on the daily AUD/USD chart, which might suggest the bounce has further to run in the near term.
AUD/USD Daily Chart
Kiwi pressured by lower dairy prices
New Zealand’s dollar looks poised for a fifth straight day of declines, pressured by a combination of weaker dairy prices at the last bi-weekly auction and a rising dollar. NZD/USD slid to 0.6529, its lowest level in more than 2-1/2 years in early trading today, and currently sits at 0.6547. Given that latest comments from the RBNZ suggest the next move by the central bank could be a cut, the downside for the flightless bird looks increasingly vulnerable, and would seem to be the path of least resistance, especially given the dollar’s expected trajectory with the next phase of US-China tariffs looming, possibly as early as this week.
ISM employment index highest in six months
The US manufacturing sector continues to power ahead on all cylinders despite the threat of trade tariffs damping demand. The ISM manufacturing PMI jumped to 61.3 in August, the highest level in 14 years. The employment index rose to 58.5, its highest level in six months, which could imply that we are in for a strong non-farm payroll number on Friday. The strong data helped push US 10-year yields to a 2.90% close, the highest since August 14.
Bank of Canada the highlight on the data deck
Though the BOC meeting will probably garner the most attention on today’s calendar, economists are not expecting any move on interest rates by the central bank this time. Most expect a no-change announcement, though with a strong hint of an October hike. By that time, the FOMC will have met and likely raised US interest rates for the third time this year.
Other data events include Euro-zone retail sales for July, Canada’s trade data for the same month with the day rounding up with speeches from Fed members Williams, Kashkari and Bostic.
You can view the full MarketPulse data calendar at: https://www.marketpulse.com/economic-events/
Emerging markets rout not yet complete
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