After one day of good news, bad news is once again resulting in Australian dollar weakness. Year-over-year GDP growth for Q3 missed expectations (2.8% vs. 3% expected), leading to weakness in the currency. Poor household spending was the biggest culprit, and has been reflected in previously announced retail sales and consumer confidence figures. As Australian households are carrying some of the world's largest debt loads, the Reserve Bank of Australia is unlikely to consider rate hikes given weakness in the consumer sector. Our short-term and medium-term outlook remain bearish.
AUD/USD is currently down and trading just above 0.7580. Looking at EUR/AUD, the pair is up and currently just above 1.5580. The GBP/AUD exchange rate is flat and currently above 1.7680.
This is a significant week for economic data relating to the Australian dollar. TD Securities inflation was higher than the previous print (2.7% vs. 2.6% prior). The RBA left cash rates on hold but omitted references to "inflation is likely to remain low for some time". Retail sales beat expectations (0.5% vs. 0.3% expected). Q3 GDP growth figures were below expectations (2.8% vs. 3% expected). On Thursday, we’ll see AiG Performance of Construction Index and trade figures. Lastly on Friday we’ll get home loans and investment lending for homes.
As the currency weakens on lower rate hike expectations and slow growth, we are now bearish on the Australian dollar in the medium-term. Looking at a weekly chart, the Aussie is trading within normal conditions. Our analysis is based on various technical indicators.