Australian capital expenditures could end 2017 in positive note – Forex News Preview
February 28, 2018 5:26 pm
Australia will see its latest business investment data early on Thursday with the release of private new capital expenditure figures (CAPEX) for the final quarter of 2017. While analysts predict a slowdown in private investments, the measure is expected to finish the year in growth territory for the first time since 2011, flagging a positive start in 2018 and suggesting an ongoing economic expansion ahead of next week’s GDP growth numbers.
Few minutes after midnight on Thursday, the CAPEX survey published by the Australian Bureau of Statistics is projected to show an increase of 0.9% q/q in private investments, reflecting the fourth consecutive quarter of gains. This is compared with the 1.0% expansion seen previously and the 1 ½ -year high of 1.1% hit in the second quarter.
Recent evidence on business conditions is supportive of the above projections, with the National Australia Bank (NAB) reporting at its January survey that the NAB business confidence index has recovered further in the aforementioned month to stand at +12, above the long-run average of +5. Meanwhile, the NAB chief economist admitted that leading indicators in the survey were in general encouraging, saying that capacity utilization has been improving, giving hopes that investment and employment could strengthen in the future.
Indeed, an expanding business environment could boost the labor market and ease some of the challenges faced in the consumer sector including the subdued path of wage growth which in turn feeds to a weaker consumer spending. On the monetary front, the Reserve Bank of Australia is eagerly waiting for the wage growth to gain steam and therefore inflation to pick up before it decides to raise interest rates from the current record low levels. Thus, Thursday’s CAPEX could sound music to the RBA’s ears.
Turning to forex markets, aussie/dollar could move higher in case of an upward surprise in the data, with scope to test 0.7850, a previous congested area. In the best scenario, the market could break the 0.79 handle and crawl up to meet the previous high of 0.7988 reached on February 16.
In the alternative scenario, disappointing prints could send prices below the 200-day moving average of 0.7792, increasing chances for further downside movements towards the 0.77 psychological level.
Australia will see its latest business investment data early on Thursday with the release of private new capital expenditure figures (CAPEX) for the final quarter of 2017. While analysts predict a slowdown in private investments, the measure is expected to finish the year in growth territory for the first time since 2011, flagging a positive start in 2018 and suggesting an ongoing economic expansion ahead of next week’s GDP growth numbers.
Few minutes after midnight on Thursday, the CAPEX survey published by the Australian Bureau of Statistics is projected to show an increase of 0.9% q/q in private investments, reflecting the fourth consecutive quarter of gains. This is compared with the 1.0% expansion seen previously and the 1 ½ -year high of 1.1% hit in the second quarter.
Recent evidence on business conditions is supportive of the above projections, with the National Australia Bank (NAB) reporting at its January survey that the NAB business confidence index has recovered further in the aforementioned month to stand at +12, above the long-run average of +5. Meanwhile, the NAB chief economist admitted that leading indicators in the survey were in general encouraging, saying that capacity utilization has been improving, giving hopes that investment and employment could strengthen in the future.
Indeed, an expanding business environment could boost the labor market and ease some of the challenges faced in the consumer sector including the subdued path of wage growth which in turn feeds to a weaker consumer spending. On the monetary front, the Reserve Bank of Australia is eagerly waiting for the wage growth to gain steam and therefore inflation to pick up before it decides to raise interest rates from the current record low levels. Thus, Thursday’s CAPEX could sound music to the RBA’s ears.
Turning to forex markets, aussie/dollar could move higher in case of an upward surprise in the data, with scope to test 0.7850, a previous congested area. In the best scenario, the market could break the 0.79 handle and crawl up to meet the previous high of 0.7988 reached on February 16.
In the alternative scenario, disappointing prints could send prices below the 200-day moving average of 0.7792, increasing chances for further downside movements towards the 0.77 psychological level.
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