The Australian Dollar fell slightly after the government reported that the economy expanded at a slower-than-expected pace in the third quarter. Gross Domestic Product in the period rose 0.2% quarter-over-quarter, below the 0.4% that was expected, and significantly slower than the 1.1% growth in the previous quarter.
Market interest rate expectations for Australia—already reeling from dovish comments from RBA Governor Glenn Stevens last week—have ticked even lower, with only 20 basis points of hikes anticipated over the next twelve months. Recall that last week, Stevens said “there’s unlikely to be any [rate hikes] from us imminently.”
That being said, the Australian economy remains on firm footing all things considered. The 0.2% increase in GDP follows robust 1.1% growth in the second quarter. Moreover, for the year as a whole, Australian GDP should increase more than 3%, even after the latest disappointment.
Separately, the Chinese Manufacturing Purchasing Managers Index (PMI) was reported to be 55.2 in November, up from the 54.7 reading in October, and better than the 54.8 consensus estimate. This was the best reading since April and up notably from the levels of July when the PMI fell to a recent low of 51.2. Currency markets had little reaction to the release as market focus remains on European debt woes.
Currently, AUD/USD is holding right above recent two-month lows near 0.9550, as the market digests the latest economic data. The move so far seems rather muted, perhaps indicating that the pair is attracting buying interest around these levels. On the other hand, it could just be a pause as traders await more news flow related to the European sovereign debt situation. The next significant support level lies at former resistance near 0.9375.
AUD/USD Daily Chart:
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