- Hopes weren't high for Australian GDP data
- However, the numbers were lower than even the gloomiest forecasts
- Already pressured, AUD/USD has slipped
The Australian Dollar was clobbered on Wednesday as Australian third-quarter Gross Domestic Product came in much weaker than expected.
GDP shrank by 0.5% compared to the second quarter, official figures showed, much worse than the 0.1% slide expected. This was the first on-quarter slide for more than five years. On-year the economy grew by 1.8%. However, that was far below both the 2.2% expected and the strong, 3.3% seen in the second quarter.
Growth weakness was partly down to feeble export growth. Stronger exports had helped the Australian economy expand at a good clip earlier in the year. But a falloff in export demand left the economy reliant on domestic consumption for growth. As we see, it hasn't done the trick.
AUD/USD slipped to 0.74225 after the numbers from 0.74750 beforehand. A fair bit of gloom was already priced in given some of the weaker third-quarter economic data already released.
The key Australian Cash Rate has been at a record low of 1.5% since August. Markets have been wondering whether there would be any further reductions or whether that low represents the nadir for this cycle.
On the evidence of this GDP print, it would seem likely that more monetary stimulus could be in the offing. However, in Australia as elsewhere there are question marks over the likely efficacy of still-lower rates. Fiscal policy may have to do more of the heavy lifting from here.
Watching the more forward-looking Australian data is likely to be a major foreign-exchange market pastime in the coming months. Australia has not had a recession defined as two quarters of negative growth for 25 years.
At the moment, forecasters don't seem to be expecting that it is going to endure one this year. But the odds against have certainly just fallen.
Nasty shock: AUD/USD
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--- Written by David Cottle, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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