By John Hardy
Australia’s third-quarter GDP numbers came in weaker than expected, with a confusing mix of quarter-on-quarter numbers that disappointed by minus 0.1 percent after a plus 0.1 percent revision to the Q2 number. The year-on-year number missed by minus 0.3 percent — putting Australia’s growth at plus 2.3 percent year-on-year — on top of a minus 0.2 percent. The market didn’t seem to care to sift through the implications of this data and decided that the weak Aussie trend was worth piling back into and AUDUSD weakened back the recent lows in the wake of the data.
Bank of Canada preview
As I covered in my post yesterday on the three commodity dollars, we have a major breakout in USDCAD here above 1.0600 ahead of the Bank of Canada meeting. The forward-rate curve in Canada shows no anticipation of the Bank of Canada (BoC) making a move any time soon. Two-year yields in Canada have been collapsing recently and since the previous BoC meeting, at which the bank removed mention of a tightening bias and adjusted its growth and inflation forecasts lower.
It is likely hoping to copy something from the Reserve Bank of Australia’s game plan, hoping to see the exchange rate lower as a support to Canada’s economy, especially after years of Dutch disease from an excessively high exchange rate. Canada’s 2-year swap is at 1.30 percent versus 1.50 percent as recently as mid-October. The low of the year was close to 1.25 percent earlier this year.
