Q3 GDP growth below forecast
The Australian economy expanded 0.4% in the third quarter on a quarter-by-quarter basis, a slower pace than Q2’s revised +0.6% and below economists’ estimates of +0.5% growth. Taking some sting out of the downside miss was the upward revision to Q2’s quarterly data by 0.1% and +0.2% to the annualized numbers.
The kneejerk reaction was for the Australian dollar to be marked lower, dropping to 0.6838 initially versus the US dollar and then extending the decline to 0.6828 subsequently. AUD/USD is now at 0.6831 and is still up 1.02% on the week. The 55-hour moving average is at 0.6816. Against the Japanese yen, the Aussie fell for the first time in three days, reaching 74.10.
AUD/USD Hourly Chart
Relations turn frosty in December
Diplomatic relations between the US and China have taken a turn for the worse recently, with the US passing of the HK Democracy Bill a trigger event. China appeared to steer clear of using the trade negotiations as a retaliation tool earlier this week when they banned US warships from visiting Hong Kong and curbed access for human rights organizations.
If you thought that would be the end of things, this morning China’s Ministry of Foreign Affairs vowed to respond further to the human rights bill as the US considers a Xinjiang-related bill which could harm Chinese firms’ interests further.
Trump’s comments overnight that he is in no rush to sign a trade deal unless it is the “right one”, possibly pushing everything past the November election, has put the Chinese currency under pressure this morning, with USD/CNH rising 0.05% to 7.0720. The FX pair opened above the 55-day moving average for the first time since October 11.
USD/CNH Daily Chart
Bank of Canada seen on hold
The Bank of Canada holds its rate policy meeting today and is widely expected to keep its benchmark rate unchanged at 1.75%, according to the latest survey. Third quarter GDP growth came in above expectations at +1.3% q/q, which might placate any doves and recent comments from Governor Poloz have certainly not been biased towards a cut.
Market pricing suggests only a 4% chance of a 25 bps cut at today’s meeting, with the probability only rising above 50% at the June meeting, according to Bloomberg calculations.
Services PMIs on tap
Today it’s the turn of the services PMIs to populate the data calendar with the final readings from Markit for Germany, the Euro-zone, the UK and the US all due. Provisional readings were 51.3, 51.5, 48.6 and 51.6, respectively. The ISM also announces its reading for November, which is expected to slide to 54.5 from 54.7 in October.
Aside from the PMIs, the forerunner to Friday’s non-farm payrolls, the ADP employment change, is expected to show that 140,000 jobs were added last month, an increase from 125,000 in October. A speech from Fed’s Quarles completes the session.
