Australian Dollar Faces Capex Data

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Australian Capital expenditures data offers scope for AUD to claw back some of the ground given to rivals in August and to build on its 2017 gain.

A good private sector capital expenditures number for the second-quarter, due out 02:30 London-time, could help the Australian Dollar attempt to build on its 2017 gain and take back ground given to G10 rivals during August.

The consensus among economists is that investment by Australia Inc. rose at a rate of 0.2% during the three months to the end of June, down slightly from the 0.3% rate seen in the first quarter but still a healthy clip.

“Australia’s private-sector CAPEX data will help determine if the AUD’s run higher can continue," says Valentin Marinov, head of G10 fx strategy at Credit Agricole. “Improving profitability as well as strong confidence and trading conditions suggest that investment should begin to pick up after several years of decline.

The Aussie dollar dropped against all of its G10 rivals, barring the Canadian and New Zealand dollars, during the London session Wednesday despite a recovery in risk appetite with Tuesday’s North Korean missile launch having fallen from the headlines.

Australia’s currency has given ground to the bulk of its G10 rivals in August thanks to a sideways movement in iron ore prices and geopolitical tensions stemming from persistent sabre rattling by North Korea.

However, it has gained strongly for the year to date, as its own as well as China’s economy have remained on even keels throughout the first half.

In other recent economic news, data released on Tuesday showed 9.3% growth in the value of Australian construction work completed during the second quarter, which was much higher than the 0.9% economists consensus.

“We assume that the figure has been inflated by the importation of Prelude, a floating LNG platform. The platform set sail for WA from a South Korean shipyard on June 28,” says Andrew Hanlan, an economist at Westpac.

July new building approvals also declined at a lesser pace than some economy-watchers had been predicting, according to Australian Bureau of Statistics data released overnight, falling at a rate of -1.7% instead of the -5.4% drop that had been forecast.

But new home sales have continued their nascent decline during July, according to a report from the Housing Industry Association, falling at a faster than expected rate of 3.7%.

“This trend is consistent with HIA’s expectation that activity will decline modestly from these record high levels over a number of years,” says HIA’s principal economist, Tim Reardon.

The pound to Australian dollar exchange rate rose 0.74% to 1.6359 during the London session Wednesday while the Australian dollar to euro exchange rate slid 0.24% to 0.6630.

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