Aussie GDP Q3 misses the mark, AUD/USD drops to session lows

Australia’s Q3 national accounts in the Gross Domestic Product has been released. Prior to the data, analysts at Westpac had noted that," growth over the year to Q2 was just 1.4%, the slowest pace since 2009 and revealing that the economy was declining in per capita terms," arguing that, "favourable base effects should ensure that annual growth at least improves.

The data arrived as follows

• Gross Domestic Product (YoY) (Q3) 1.7 %  vs exp  1.7 % (prior 1.4 %).
• Gross Domestic Product (QoQ) (Q3) 0.4 % vs exp  0.5 % (prior  0.5 %).

Full report

The Australian economy grew 0.4 per cent in seasonally adjusted chain volume terms in the September quarter 2019 and 1.7 per cent through the year, according to figures released by the Australian Bureau of Statistics (ABS) today.

Chief Economist for the ABS, Bruce Hockman, said: “The economy has continued to grow, however, the rate of growth remains well below the long-run average.” Net exports contributed 0.2 percentage points to growth this quarter. Domestic final demand remained subdued contributing 0.2 percentage points. Government spending was the main contributor to growth in domestic final demand, reflecting ongoing delivery of services in disability, health and aged care.

RBA can hold and wait to see how things develop until 2020 

• The nuts and bolts of this report point to an RBA cut, potentially in the early part of 2020, considering there has not been a drastic worsening in key areas, yet with improvements in exports and consumption albeit with continued dependence on government spending and a requirement on low-interest rates. 

"It certainly suggests that activity has been stronger in the recent past, though it is the sharper downturn in activity in 3Q19 that we think is the more important consideration for the RBA, and which will likely weigh on the AUD," analysts at ING Bank argued – "The Reserve Bank of Australia has been characterising the economy as experiencing a "gentle upturn". But this data seems to suggest more of a gentle downswing. Consequently, it will be very hard for RBA Governor Lowe to hold back from easing again in February 2020, as he did this week."

AUD/USD daily chart and downside levels to watch 

Bearish targets

• 0.6815/30
• 0.6780
• 0.6724
• 0.6671

The initial support offered by the 50-day moving average and convergence of the 21-hour moving average that comes in at around the day's lows of between 0.6815/30 has been targeted on the release. 0.6780 comes as a key extension level for the move, but there is little follow-through at this stage considering how weak the US dollar is and a reluctance to be 'long' of it. However, on a follow-through, bars can target the 0.6724 October 16 low ahead of the 0.6671 October low.