Australian Dollar Rebounds Against Greenback After Poor Q3 GDP Figure

The Australian Bureau of Statistics (ABS) published a detailed breakdown today of which parts of the Australian economy declined in Q3 of 2016. While overall economic activity in Australia dropped 0.5 percent last quarter, the ABS states that overall economic growth is still positive:
“Through the year growth remains positive at 1.8 per cent, reflecting the three previous quarters of growth.“
According to the ABS, the decline in the construction industry, which registered a 3.6 percent drop due to lower investment in building activity, had the biggest effect on the GDP calculation. Sub-optimal growth numbers were also seen in the financial and insurance industries.

Additionally, the ABS also states that the growth in the agricultural sector helped offset the declines in most other industries:
“The largest offset to these falls was agriculture which grew 7.5 per cent. Mining production contributed no growth, but maintained its historically high levels of production.“
Currency Impact:
The Forex market did not respond very well to the bad economic figures. Yesterday, the Australian dollar lost 0.65 percent against the U.S. dollar in the space of 30 minutes, following the release the negative GDP print - the first one since May of 2011. However, today, the Australian currency gained 0.89 percent against the greenback, as bad consumer credit news coming out of the U.S. pushed the dollar lower.

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  1. Commodity prices will continue to affect the Australian GDP figures for some time.
    I doubt we'll see much of an upturn until the world's market place steadies and Trump reveals his version of 'the new world order'.


  2. This is a classic example of an over-reaction induced by an apparent bad news. It was disproportionate given that the Chinese government has indicated its clear intention to depend less on export for growth over the coming years. Fulfilling internal demand for consumer goods will maintain the demand from China for commodities from Australia in the coming years. Expect to see a continuing strengthening of the Australian dollar, and a downward pressure on the US dollar as China moves more currency holding and commodity purchasing away from US dollar influences.

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