GBP/AUD has been knocking on $2.0000 over the past few weeks and this has been a product of much looser and easier policy expectations for Australia. Local data has continued to show a deteriorating outlook and this is prompting analysts and traders to expect further easing down the track.
On the calendar today we had the all-important capex numbers. This reading is a key partial input to the official GDP numbers and therefore tend to carry significant weight for the AUD. The headline print showed a 2.2% decline in private capital expenditure quarter-on-quarter when the market was expecting it down 1.7%.
Perhaps the most significant takeout of the reading was the first estimate for intended 2015/2016 capital expenditure. This reading came in below expectations at $109.8 billion. Declines for both mining and non-mining investment means the economy is not quite responding to the last rate cut cycle in the way they would have wanted it to.
Today’s reading is also helping to shape up rate expectations for next week with the probability rising from around 30% to 50%. With that in mind, GBP/AUD popped a bit higher and is now trading above $1.9800. There is an uptrend that has been in place since mid-January and that has managed to hold.
The current momentum suggests the pair could be retesting the $2.0000 mark again in the near term. There will also be plenty of positioning heading into next week’s line ball call on rates. In the UK today we have quarterly GDP and business investment data.