Article Highlights

  • Australia’s AIG construction index up from 45.9 to 46.6 in November
  • Australia’s GDP contracts by 0.5% vs. 0.2% growth expected, 0.5% previous
  • Japan’s leading indicators up from 100.3% to 101.0% in October
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Aussie bears had a field day after Australia printed its first economic contraction in five years. Read on to know what’s up in the forex scene!

Major Events:

Australia’s GDP miss – The Australian dollar took a beating during the Asian session after Australia’s economy posted its first contraction in more than five years.

Data from the Land Down Under showed a 0.5% GDP decline in Q3 2016, missing estimates of a 0.2% growth and Q2’s 0.5% uptick. This marks the steepest contraction since the 2008 global financial crisis and is also the first time Australia’s economy has contracted since March 2011. On an annualized basis, the economy grew by 1.8% during the quarter, much weaker than the previous 3.3% increase. Yikes!

The biggest drags include a 10.4% decline in government investment, which took out 0.5% from the GDP, the 2.7% decline in gross fixed capital formation, which shaved 0.7% points, and a decline in private investment that resulted to the GDP losing 0.3%.

Net exports weren’t any help either, as imports grew by 1.3%, outpacing exports’ 0.3% growth and contributing to -0.2% in the GDP. The silver lining was the household financial consumption expenditure –the largest GDP component – growing by 0.4% and contributing 0.3% points to the GDP.

Overall, the numbers are consistent with earlier reports hinting of slower construction activity, weaker private and public investment, and imports outpacing exports. Not a good sign for Australia’s economy, which is still adjusting from a mining boom.

Mixed risk sentiment – Major currencies traded on tight ranges despite the strong performances of the Asian bourses. One possible reason is that forex traders are having trouble extending rallies with the ECB and Fed’s monetary policy decisions only a few days away.

Australia’s A SX 200 is up by 0.91%, Hang Seng is up by 0.57%, Shanghai index is up by 0.44%, and Nikkei is up by 0.74%.

Major Market Movers:

AUD – The Aussie lost ground as soon as the numbers were printed. Luckily, the bearish move lost steam barely an hour after the release and the comdoll found support against its major counterparts.

AUD/USD fell to a low of .7417 before capping the session with a 20-pip loss to .7437 while AUD/JPY also dipped to 84.68 before closing with a 26-pip loss to 84.82.

Watch Out For:

  • 8:00 am GMT: German industrial production (0.9% expected, -1.8% previous)
  • 8:45 am GMT: French trade balance (-4.2B EUR expected, -4.8B EUR previous)
  • 9:00 am GMT: Switzerland’s foreign currency reserves
  • 9:30 am GMT: U.K. Halifax house price index (0.2% expected, 1.4% previous)
  • 10:00 am GMT: Italian quarterly unemployment rate (11.6% expected, 11.5% previous)
  • 10:30 am GMT: U.K. manufacturing production (0.2% expected, 0.6% previous)
  • 10:30 am GMT: U.K. industrial production (0.2% expected, -0.4% previous)

See also:

U.S. Session Recap
London Session Recap

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