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Australian GDP, RBA Stevens eyed - Westpac

FXStreet (Bali) - Sean Callow, FX Strategist at Westpac, reviews the day ahead, paying special attention to Australia's Q2 GDP and RBA's Stevens speech.

Key Quotes

After various inputs released this week, Westpac is sticking to 0.4% q/q, 3.0% y/y for headline Q2 GDP (11:30am Syd/9:30am Sing/HK). The savage swing in net exports from a huge 1.4ppt contribution in Q1 to -0.9ppt in Q2 virtually ensures a soft quarter after Q1’s 1.1% jump. Some offset comes from private non-farm inventories, set to swing from -0.4ppt to 1.0. Business investment should fall slightly but housing construction should have risen modestly, likewise public demand. Most important in avoiding a very weak number is household consumption, which we see up 0.5% q/q. This counts on the real retail sales survey being misleading: it printed 1.3% in Q1 but -0.2% in Q2. This survey only accounts for about 40% of total consumer spending. Some forecasters raised their estimates this week, consensus now matching Westpac’s 0.4% expectation.

RBA Governor Stevens speaks to an economic luncheon in Adelaide from 1:20pm Sydney/11:20am Sing/HK. This speech should help limit the AUD response to any surprise in GDP, especially if the reading is soft, as Stevens has already publicly discussed signs that Q3 will be stronger than the likely soft Q2 (RBA forecasts imply they are looking for around 0.4% on GDP). The Q&A should also see discussion of AUD, with interest in whether the tweaked language in yesterday’s statement will be accompanied by any new phrases about overvaluation.

Asia’s calendar is dominated by Aug services PMIs, not typically market movers. China’s are due at 11am Syd/9am local (official) and 45 min later (HSBC/Markit). In Europe we will see final Aug PMIs, EZ Jul retail sales and revised EZ GDP, which printed at 0.0% q/q on the first reading.

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