AUD: Weak GDP numbers dragged the Australian dollar down - MUFG

FXStreet (Delhi) – Lee Hardman, Currency Analyst at MUFG expects the Australian dollar to extend its weakness as we are closing on the year following the release of the latest weaker than expected GDP report from Australia. The weaker data has reinforced concerns over the negative fallout impact from weakening growth in Asia.

Key Quotes

“The Australian dollar briefly fell below the 0.7000-level against the US dollar for the first time since April 2009 before quickly recovering lost ground as downward pressure on Asian and European equity markets has eased.”

“The report revealed that Australia’s economy slowed more sharply than expected expanding by just 0.2% in Q2 following a robust expansion of 0.9% in Q1. As a result the annual rate of real GDP growth eased to 2.0% which was the slowest pace since Q3 2013.”

“Weakness in exports was the main driver of the economic slowdown in Q2 subtracting -0.7 percentage points from real GDP growth. Stronger government expenditure helped to prevent an even sharper economic slowdown adding 0.4 percentage points to real GDP growth.”

“The report will increase pressure on the RBA to ease monetary policy further combined with building evidence of slowing growth in Asia which is increasing downside risks to RBA’s outlook for growth and inflation in Australia.”

“In these circumstances, we continue to expect the Australian dollar to remain under downward pressure heading into year end. The AUD/USD rate has recently broken below trend line support joining the cyclical lows from 2001 and 2008 providing a bearish technical signal as well.”