3 Dec 2014
Weak Australian GDP report prompts RBA rate cut speculation - BTMU
FXStreet (Barcelona) - Lee Hardman, FX Analyst at the Bank of Tokyo Mitsubishi UFJ, notes that the Q3 soft GDP data in Australia will weaken the AUD further thereby easing monetary conditions, which might increase the chances for a rate cut by RBA.
Key Quotes
"The Australian dollar has underperformed in the Asian trading session following the release of the weaker than expected Australian GDP report for Q3. The report revealed that real GDP expanded more modestly by 0.3% in Q3 lowering the annual rate of growth to a below trend 2.7%."
"The negative impact of the mining investment slowdown and ongoing deterioration in Australia’s terms of trade is becoming more evident. Real gross domestic income, which is GDP adjusted for the terms of trade, contracted for the second consecutive quarter by 0.4% in Q3 and is on course to contract for third consecutive quarter in Q4."
"The GDP deflator was also weak contracting by 0.4% in Q3 leaving the annual rate flat highlighting weak inflation pressures. As a result, nominal GDP contracted by -0.1% in Q3 for the first time since Q2 2009."
"The weak report and ongoing deterioration in Australia’s terms of trade are encouraging expectations that the RBA will resume monetary easing next year reinforcing downward pressure on the Australian dollar. We continue to see scope for the Australian dollar to weaken further in the year ahead which will help ease overall monetary conditions in Australia and dampen the need for further RBA rate cuts."
"In light of the weaker than expected Australian GDP report, the Australian dollar derived only limited support from the release overnight of the stronger services PMI surveys from China for November. The official non-manufacturing PMI survey and HSBC services PMI survey both increased marginally by 0.1 point to 53.9 and 53.0 respectively in November. A further loss of economic growth momentum is still expected heading into year-end driven by weakness in the manufacturing sector."
Key Quotes
"The Australian dollar has underperformed in the Asian trading session following the release of the weaker than expected Australian GDP report for Q3. The report revealed that real GDP expanded more modestly by 0.3% in Q3 lowering the annual rate of growth to a below trend 2.7%."
"The negative impact of the mining investment slowdown and ongoing deterioration in Australia’s terms of trade is becoming more evident. Real gross domestic income, which is GDP adjusted for the terms of trade, contracted for the second consecutive quarter by 0.4% in Q3 and is on course to contract for third consecutive quarter in Q4."
"The GDP deflator was also weak contracting by 0.4% in Q3 leaving the annual rate flat highlighting weak inflation pressures. As a result, nominal GDP contracted by -0.1% in Q3 for the first time since Q2 2009."
"The weak report and ongoing deterioration in Australia’s terms of trade are encouraging expectations that the RBA will resume monetary easing next year reinforcing downward pressure on the Australian dollar. We continue to see scope for the Australian dollar to weaken further in the year ahead which will help ease overall monetary conditions in Australia and dampen the need for further RBA rate cuts."
"In light of the weaker than expected Australian GDP report, the Australian dollar derived only limited support from the release overnight of the stronger services PMI surveys from China for November. The official non-manufacturing PMI survey and HSBC services PMI survey both increased marginally by 0.1 point to 53.9 and 53.0 respectively in November. A further loss of economic growth momentum is still expected heading into year-end driven by weakness in the manufacturing sector."