Aussie Rises As Q2 GDP Growth Meets Estimates

Aussie Rises As Q2 GDP Growth Meets Estimates
September 5, 2019


The Aussie rallied against the greenback yesterday after the Australian Bureau of Statistics reported second-quarter GDP growth in line with analysts’ expectations. The currency pair also got a boost from better-than-anticipated services PMI (Purchase Managers’ Index) of China. From a low of 0.6754, the AUD/USD pair surged to 0.6825 in the past 24 hours.

Australia’s GDP grew 0.5% q-o-q in the second quarter of 2019, unchanged from the March quarter figure, which was upwardly revised from 0.4%. On an annualized basis, GDP grew 1.4%, matching analysts’ expectations, but below the 1.7% (downwardly revised from 1.8%) rise reported in the previous quarter.

Bruce Hockman, Chief Economist at ABS, explained the reason for the GDP growth. Hockman said, “The external sector drove GDP growth this quarter, while growth in the domestic economy remains steady.”

Furthermore, the terms of trade grew 1.4% in the June quarter. Net exports contributed 0.6% to GDP growth. Domestic final demand added 0.3% to GDP growth. However, the household saving ratio stood at an unimpressive level of 2.30.

Hockman also highlighted the impressive performance of the mining sector. He said, “Strength in mining-related activity was seen across a number of measures in the economy.”

Mining gross value contributed 3.4%, led by robust production of coal and liquefied natural gas. Mining profits increased by 10.6%, led by robust export growth and a sustained increase in the terms of trade.

Mining investment increased 2.4%, primarily due to an increase in machinery and equipment investment.

In China, which is the major trade partner of Australia, the Caixin composite output index rose to 51.60 in August from 50.90 in July. A score above 50 implies expansion.

Activity across the service sector grew at a quicker rate, compared with that of the manufacturing industry. The services Purchasing Managers’ Index hit a three-month high of 52.10, an increase from 51.60 in July. The reading was anticipated to rise slightly to 51.70.

Commenting on the likely economic recovery, Zhengsheng Zhong, director of macroeconomic analysis at CEBM Group, said: “China’s economy showed clear signs of a recovery in August, especially in the employment sector. Countercyclical policies took effect gradually.”

Led by services, the new order growth rate was the fastest since April 2019. In August, enterprises, which provide services, recorded an increase in exports, while manufacturing companies reported the steepest decline since November 2018. Employee count increased for the first time since April, with services firms mainly contributing to the expansion.

Australia’s second-quarter GDP data, in line with market expectations, and positive service sector PMI of China is expected to keep the Aussie bullish in the short-term.

Technically, the AUD/USD pair is moving along an ascending channel, as shown in the image below. The currency pair is also trading above its 50-day moving average. The momentum indicator is also making new highs. As a result, we can expect the currency pair to remain bullish in the short-term.

AUD - techncial analysis - 5th Sept 2019

Disclaimer: Any financial trading analysis offered here is our opinion and is not intended as advice or direction for investors. We cannot guarantee the success of any trades made as a consequence of this article, and we encourage traders to incorporate a strong money management strategy to limit losses when they enter the markets. Please use this article as part of your own research before formulating strategies prior to trading.


Richard W

Richard W

Richard is the guy who know everything there is about the financial industry, working in a top firm for over 15 years, he will give the lowdown on some of the biggest companies in the world

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