AUD/USD surrenders gains on below-forecast Aussie construction data

The AUD is losing altitude on weaker-than-expected Australian second-quarter construction data.
A recovery in risk assets could put a floor under the Aussie dollar.

Omkar Godbole FXStreet Contributor

The bid tone around the Aussie dollar weakened following the release of a dismal Aussie data at 01:30 GMT.

Construction work done, a key metric used in GDP calculations, fell 3.8 percent in the second quarter. That has been the largest contraction since the fourth quarter of 2017. The consensus estimate was for a drop of 1% following a 1.9% contraction in the first quarter.

With the construction data missing estimates, the probability of Australian second-quarter GDP disappointing expectations has gone up. Also, the weaker-than-expected data validates the Reserve Bank of Australia's (RBA) dovish stance. The RBA has eased policy twice since June to a record low of 1% and the financial markets are pricing in another RBA cut later this year and a follow-on move to 0.5% in February, according to Reuters.

The weak data release and the dovish RBA expectations will likely keep the AUD on the defensive during the day ahead. The AUD/USD pair has already surrendered gains. The pair is now reporting marginal losses at 0.6747 – down 16 pips from the high of 0.6763 seen ahead of the release of the key data.

The downside, however, could be limited if the equities put on a good show. As of writing, the futures on the S&P 500 index, a global benchmark for equities, are reporting 0.28% gains.

Pivot points

1. R3 0.6807
2. R2 0.6794
3. R1 0.6773
PP 0.6759
1. S1 0.6739
2. S2 0.6725
3. S3 0.6704

Author

Omkar Godbole

FXStreet Contributor

Omkar Godbole, editor and analyst, joined FXStreet after four years as a research analyst at several Indian brokerage companies.

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