AUD/USD Weekly Fundamental Analysis July 14-18, 2014 Forecast The AUD/USD held right at the 94 level on lackluster data from China and a significant climb in unemployment this week. The Aussie ended at 0.9401. China will release second quarter GDP data on July 15th. Analysts estimate that output growth picked-up marginally to 7.5% y/y from the 7.4% pace in the January-March period, as implied by modest improvements in purchasing managers’ indices and credit metrics over the past few months. The services sector continues to increase in importance as an economic motor, exceeding the industrial sector in size and pace of growth. In the medium-to-long term, China’s economic expansion is decelerating due to a transition to a new stage of economic development that relies more on productivity improvements than factor inputs, such as capital investment. Accordingly, we expect the nation’s real GDP gains to average 7.3% y/y this year. A housing market correction poses the largest downside risk to economic momentum, though the Chinese administration has the means to provide support through fiscal measures if output growth slows more than envisioned. RBA governor Glenn Stevens has warned that a dangerous complacency about Australia’s economic growth is letting political leaders defer tough decisions on the budget and risking a much more serious downturn when the next one occurs. In an exclusive interview with The Weekend Australian, Mr Stevens said a myth had developed that Australia had a “miracle” economy that was somehow immune from the turbulence affecting the rest of the world. “We are creating a narrative here about the 23 years of no recession as though this is some miracle and we’ve advanced smoothly without any setback, but that’s not really true.” He noted that in both 2000 and 2008, Australia’s economy had contracted for one quarter, while the jobless rate had risen by a percentage point. Consistent with the run of weak economic data has been the weakness in the Westpac Melbourne Institute index of consumer sentiment. In the wake of the budget announcement, the index fell by 7 per cent to be 16.5 per cent below the recent peak in November 2013. The key to a recovery in momentum in the economy will be a solid recovery in the index as concerns around the budget dissipate.
Posted on: Sun, 13 Jul 2014 14:15:45 +0000
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