AUD: Weak investment epitomises 'lowflation' economy - ING
Slightly dovish RBA talk has left the AUD curve pretty flat, with markets barely pricing in a full 25bp rate hike in 2018, suggests the research team at ING.
“We think the flattening story looks to be done - and it'll be up to the data to determine future movements. After a stunning 3Q construction work done print (+15.7%), the data focus shifts to the 3Q Private Capex report (Thu). It's no surprise to see Australian investment weak when you look at a long-run time series of capex spending; the 5-year average trend in the mid-2000s was around 3.2% quarterly growth in capex, while the latest equivalent reading has slumped to -2.7%. That puts some context on this week's reading - where a modest 1% QoQ pick up in 3Q17 won't change the negative historical average much.”
“We look for AUD/USD to remain supported in a benign US rate and global risk environment, with the bias more skewed towards a return up to the 200-dma average (0.7695).”