The Australian dollar tread water overnight as continued strength in bulk commodity prices, and a hint of confidence from the RBA in December, was offset by broad-based US dollar strength and the likelihood of a weak Australian Q3 GDP report arriving later in today’s session.
However, as shown in the scoreboard below, the Aussie actually outperformed against most major crosses except the Japanese yen:
- AUD/USD 0.7454 , -0.0018 , -0.24%
- AUD/JPY 85.02 , -0.03 , -0.04%
- AUD/CNH 5.1329 , 0.0104 , 0.20%
- AUD/EUR 0.6955 , 0.0015 , 0.22%
- AUD/GBP 0.5884 , 0.0017 , 0.29%
- AUD/NZD 1.0476 , 0.0015 , 0.14%
“AUD/USD remains in much the same trading range it has been in for the past two weeks,” said Joseph Capurso, senior currency strategist at the CBA, noting its resilience was due to higher commodity prices with the exception of oil.
Turning to Wednesday trade in Asia, movements in the Aussie are likely to be dictated by the release of Australia’s September quarter GDP report at 11.30am AEDT.
Economists expect real GDP to contract by 0.1%, seeing the year-on-year rate tumble from 3.3% to 2.2%.
If correct, it would be the first quarter of negative economic growth seen since Q1 2011. It would also be only the fourth negative quarter seen in the past 25 years.
Capurso suggests that the Aussie “will today face the headwind of a very weak Q3 GDP report”, noting that risks to the bank’s 0.1% quarterly growth forecast are skewed to the downside.
While a weak outcome is a near certainty, that has all but been absorbed by financial markets, suggesting that only an ugly figure — say a quarterly decline of 0.3% or more — will be required to place pressure on the Aussie.
Indeed, with pessimism already built in, there’s a chance the Aussie could actually rally on a at-or-above consensus print.
Stranger things have happened, particularly when you’re talking about a release that reveals where the economy has been rather than where it is heading.
Outside of the GDP release, there’s next to nothing on the economic radar in Asia that looks likely to generate significant volatility in the Aussie.
Later in the session, China will release its FX reserves data for November — something that will get plenty of attention given recent weakness in the yuan and attempts from policymakers to curb capital outflows.
There is no set time for the release, but it tends to arrive in early European trade.
While there are several data events scheduled in Europe and North America, including the Bank of Canada’s latest monetary policy decision, none appear likely to be influential on the Aussie.