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Australia's CAPEX: The plot thickens for the RBA

FXStreet (Bali) - The Australian Dollar is selling fiercely following a disappointing CAPEX (private capital expenditure) release in Australia, with the currency exchanging hands over half a cent lower around 0.7220 against the US Dollar, while against the Yen, the last printings show 88.45/50 quotes.

Major decline in Q3 expenditure

Australia's private capital expenditure (CAPEX) saw a very poor headline read of -9.2% for Q3 vs -2.9% expected and -4% prior, while the 4th estimate of investment plans for 2015/16 came at A$120bln, in line with expectations, but unable to offset the downbeat headline data.

Algorithm activity post release + withdraw of liquidity by market makers has seen the Aussie find little support, as the data reflects that economic conditions in the private sector remain unfriendly to seek new investments (expenditure).

Firms' outlook raises questions

The unwillingness by firms to spent additional capital to acquire or improve assets such as equipment or buildings, is usually strongly correlated to a poor outlook for the economy, as less spending means more skepticism/pessimism about improving conditions in their respective business sector.

Ironically, the data comes in stark contrast with the latest blockbuster employment report seen in Australia, which took everyone by surprise. It certainly remains an ever more complicated jigsaw to solve by the Reserve Bank of Australia.

Out of luck Aussie bulls on poor Capex

AUD/USD's resilience has been dented on the back of the Capex data coming in well below the expected bracket of - 2.9% / -4.%. The bulls hard work has all been but erased from the recovery at 0.7227 that made highs of 0.7262 leading into the data. The focus will now be over a chilled-out RBA until the February and the FOMC this December and key data leading into the the subsequent Fed's interest rate decision.
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