Breaking: Aussie GDP contracts more than expected, hurting AUD crosses

Australia’s Q2 GDP report is out as follows:

The partial lockdown/shutdown of the economy in response to COVID-19 is reflected in these numbers.

• Australia Q2 real GDP -7.0 pct QoQ s/adj (Reuters poll -5.9 pct).
• Australia Q2 real GDP -6.3 pct YoY, s/adj (Reuters poll -5.2 pct).
• Australia Q2 final consumption expenditure -8.1 pct, s/adj.
• Australia Q2 gross fixed capital expenditure -4.9 pct, s/adj.
• Australia Q2 chain price index -0.2 pct.
• Australian bureau of statistics says GDP suffers largest quarterly fall on record.
• ABS says private demand detracted 7.9 percentage points from GDP, spending on services fell 17.6%.
• ABS says household saving to income ratio rose to 19.8% from 6.0%.
• ABS says hours worked fell a record 9.8%

However, while it is a worse than expected print and the largest on record, the data, when comparing the -6.3 YoY to -9.1% in the US, -15% in the Eurozone and -21.7% in the UK, it could attract investment to the Aussie after the initial knee-jerk.

Remember, the Federal Reserve has out-doved other central banks. 

On a weaker dollar, higher iron ore prices and Chinese demand, the surplus current account, highest on record and the yield advantage that the Aussie enjoys, are al factors supporting the bullish narrative.

Nevertheless, AUD is lower on the data.

AUD/NZD is also down, as a result. The Reserve Bank of New Zealand, Adrian Orr today said that he has no concern with the exchange rate. 

AUD/USD has dropped to a session low of 0.7341 so far, down 0.44% at the time of writing. 

• AUD/USD drops as Australia's economy contracts 6.3% in the second quarter

• AUD/JPY slips below 78.00 on downbeat Aussie GDP

Description of Gross Domestic Product

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 as a broad measure of the 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.