It’s been a pretty quiet week for the Australian dollar due to a lack of local market moving events or headline economic data. The market’s attention has been offshore, with investors weighing the prospect of more supportive monetary policy action from Japan and Europe against a less dovish Fed.
Nonetheless, the release of Q2’s private capital expenditure figures could prove to be a big deal for the Australian dollar. In that respect, it’s very important to look beyond the headline figure (private CAPEX is expected to fall around 0.9% in Q2 to around AUD142bn) as it can mask underlying strength or weakness in the overall report.
Q1’s report was a perfect example of this. A 4.2% decline over the quarter was significantly worse than an expected 1.5% fall, but the internals of the report was fairly robust. Equipment, plant and machinery capital expenditure jumped 2.8%, which was better than expected and was a positive indicator for GDP, and planned services spending, which is a massive chunk of non-mining investment, was up an impressive 12%. And, while mining investment fell off a cliff, it didn’t come as a surprise to the market.
What to look out for (the report is due out at 1130AEST on Thursday and can be viewed here):
- Headline CAPEX figure is important but it’s not everything - expected to fall around 0.9% in Q2 to around AUD142bn
- Internals of the CAPEX data – what specific sectors are doing
- For non-mining investment, planned services spending is the number to watch
- For mining investment, look at the big sectors (e.g. equipment, plant and machinery CAPEX) - Capital expenditure plans are also very important
AUDUSD
The USD dollar has been driving AUDUSD lately, but the pair hasn’t broken any major support or resistance levels. Tomorrow’s Australian Q2 CAPEX report and GDP figures out of the US have the potential to break AUDUSD out of its trading range. In Australia, if the CAPEX data is significantly better/worse than expected the aussie may rally/sink a significant amount. In the US, with the Fed on data watch, GDP figures take on extra significance.
Source: FOREX.com
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