AUD/USD Sinks After Dismal Economic Data, Looks to GDP and RBA

TALKING POINTS: AUD/USD, RBA, GDP, BREXIT

• AUD/USD fell following the release of underperforming building and CapEx data
• Australian Dollar remains in downtrend while near-term RBA rate adjustment unlikely
• 2Q GBP, RBA Gov. Lowe’s Speech, and US employment data in spotlight next

The Australian Dollar depreciated against its US namesake after local economic data was released early into Thursday’s Asia Pacific trading session. 2Q private capital expenditures clocked in at -2.5%, a decrease from both economists’ forecasts of 0.6% and prior 0.4%. Last month’s year-over-year building approvals declined from June’s 1.6% to -5.6%, below the estimate of -3.0%. The measure calculated month-over-month was -5.2% for July, a downtick from the -2.0% forecasted and 6.4% previous.

AUD/USD Chart (5-minute)

The underperforming economic data has caused the currency pair to resume its year-long downtrend. The Aussie Dollar has recently suffered from volatility as last week’s political turmoil sent the unit tumbling when local Prime Minister Malcolm Turnbull was ousted from leadership. Furthermore, AUDUSD continued its depreciation after the release of dovish RBA minutes on August 21. AUD may continue to fall, as the Reserve Bank of Australia has maintained its record-low 1.50% OCR rate, stating that it is necessary for sustainable economic growth and that it does not see inflation picking up until 2019 or 2020.

Ahead, a packed docket of economic data may affect AUDUSD and extend its descent. Next week, the Aussie Dollar faces the release of 2Q local year-over-year GDP, as well as the Reserve Bank of Australia’s September rate decision. The risk-on unit may also find its next moves in forward guidance from RBA Governor Lowe’s speech. Looking to risk trends, Brexit developments and markets’ ensuing rally may cause the currency to gain and slightly pare its losses. Regarding the greenback, August’s unemployment rate and change in non-farm payrolls could further impact the currency pair.

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