Australian Q3 GDP fell by -1.9%, significantly beating market expectations for a -2.7% fall. The fall is the first quarter of negative growth since the 6.8% fall recorded in the June Quarter of 2020 and means the Australian economy is once again smaller than where it was pre the onset of the pandemic.
However, the better than expected print provides a welcome surprise after extended lockdowns in NSW, VIC, and the ACT and evidence of the strong momentum the economy took into the lockdown.
Notably, the household savings rate increased from 11.8% to 19.8% in Q3 as lockdown forced households to save more of their income. An indication that a wave of pent-up demand is ready to be unleashed into year-end and of a buffer should interest rates begin to rise earlier than forecast in 2022.
The main threat to the more optimistic outlook is the arrival of Omicron. Patience will be required as the scientific community assesses its severity, transmissibility, and current vaccines’ efficacy.
Overnight the AUDUSD made a fresh cycle low at .7062 low. Perhaps wary of this and the uncertainty created by Omicron, gains in the AUDUSD have been modest post the data from .7125, up to a high of .7142.
Technically the new low, was the minimum downside requirement for a chart set up we have been following since Mid-October. And while it’s too early to call the end of the down move, there are emerging signs of bullish divergence.
Should the AUDUSD trade above resistance at .7170/80, it would warn that a more substantial recovery back towards .7340 is likely before the downtrend resumes.