When is the Aussie Q2 GDP release and how could it affect the AUD/USD?

Australian GDP overview

Baffled by the pandemic-led local lockdowns and the Reserve Bank of Australia’s (RBA) cautious optimism, AUD/USD traders gear up for Australia’s second-quarter (Q2) Gross Domestic Product (GDP) figures, up for publishing at 01:30 GMT on Wednesday.

The recent data from Australia have been downbeat, but the RBA defends bond purchase tapering while flashing mixed signals on the economic recovery.

Other than being the headline economic data, today’s GDP figures may have little importance as the pandemic’s return could be witnessed in the Q3 figures and may help the RBA for better decision-marking.

Forecasts suggest the annualized pace of economic growth to come in at +9.2%, above the previous period's +1.1%, while the quarter-on-quarter (QoQ) numbers could mark the disappointment if easing to 0.5% versus 2.8% prior.

Ahead of the outcome, Westpac said:

Westpac now expects GDP to have grown by only 0.1%, down from our preliminary forecast of 0.5%. To the revised view, risks appear tilted to the downside. Indeed, the expenditure measure of GDP is expected to contract -0.1% in Q2. The two other measures of GDP (production and income) should however see positive growth, holding up the average headline measure. The updated median forecast on Bloomberg is 0.4%qtr, 9.1%yr (as the Q2 20 slump drops out), with a wide range of +0.1% (was -0.1%) to +1.2% qtr.

TD Securities expects,

The net exports and inventories data released earlier this week points to a softer Q2 GDP print than earlier expected. We expect Q2 GDP growth to be much weaker than both the market and the RBA's expectations, at +0.1% q/q, 8.8% y/y (market forecast: 0.4% q/q, 9.2% y/y, RBA: +0.7% q/q, +9.5% y/y). Additionally, a negative GDP print could be on the cards if the slowdown in private investments is much sharper. Our breakdown of contribution to GDP q/q growth are as follows: final consumption expenditure +0.8pt on firmer real retail sales and higher govt spending, gross capital formation +0.9pt, inventories -0.6pt and net exports -1.0pt.

How could it affect the AUD/USD?

AUD/USD remains firmer around two-week top above 0.7300, up 0.06% around 0.7320 ahead of the key GDP data on Wednesday. The Aussie pair seems to cheer the risk-on mood while paying a little heed to the jump in covid infections at the second most populous state Victoria. The reason could be linked to the overall easy national count and downbeat US data that helped the Fed to keep rate hike away as long as possible.

It should be noted, however, that the traders turn cautious as today’s economic calendar has multiple important data, not only from Australia but from the US as well. Furthermore, a little importance of the Aussie Q2 GDP for the RBA decision-making, due to the covid return, also helps the bulls to ignore the likely downbeat figures. Though, extreme weakness in the growth figures could pose serious challenges to the Q3 figures as markets already prepare for Australian economic contraction during the third quarter. Hence, while downbeat figures are well-anticipated, the bulls need to remain cautious in case of heavy disappointment.

Technically, a decisive break of a three-month-old descending trend line and 20-DMA, around 0.7300–7295, enables AUD/USD bulls to aim for August month’s peak near 0.7430.

Key notes

AUD/USD: Steady at two-week top around 0.7300, Australia Q2 GDP eyed

Australian GDP Preview: Economy to avert a second recession

AUD/USD Forecast: Holding above 0.7300 ahead of critical GDP data

About the Aussie GDP release

The Gross Domestic Product released by the Australian Bureau of Statistics is a measure of the total value of all goods and services produced by Australia. The GDP is considered a broad measure of economic activity and health. A rising trend has a positive effect on the AUD, while a falling trend is seen as negative (or bearish) for the AUD.