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The Future’s Looking Bright In Australia

The Future’s Looking Bright In Australia

 

After a summer that has seen large swings in sentiment for the economic outlook, depending on which side of the pond, or indeed which end of the Eurozone you reside in, Australia has stormed into the autumnal months with a stellar set of Q2 GDP figures, providing the catalyst for a positive Asian trading session. The Australian economy grew 1.2% QonQ, and 3.3% YonY, which was right at the very top of market forecasts and above the fan charts produced by the RBA. The Sydney stock exchange bounced 2% on the day, and the Aussie Dollar jumped by a cent against Sterling on the back of the news. A delve into the growth figures also reveals very encouraging components, with domestic spending on the increase and solid export growth.

A rebound in the Chinese manufacturing PMI index also served to fuel to optimism. The resultant optimism did see the safe haven Yen dip, though the market is more concerned with the non-Farm Payrolls data due out of America on Friday to let itself get carried away.

This has interesting knock on effects for the Eurozone however. With China being Australia’s biggest export recipient, and export growth up 5%, it is a safe bet that Chinese growth is back on the right track. With Germany being the world’s main producer of sort of the capital goods, plant and machinery that China will be devouring during it’s phenomenal expansion (when a country can spend $65bn on a water diversion system, relocating 440,000 residents in the process, you get the impression there may be a lot to go at) , and a weaker Euro to boost the export coffers, all of this bodes well for the Single European Currency because continued support to the peripheral countries depends crucially on a strong German economy to finance the transfer payments.

This morning, PMI data for the UK has come in significantly weaker than expected, the same data has come in a touch better than expected for the Eurozone, and Sterling has weakened nearly a cent against the Euro and half a cent against the dollar in reaction. The US will release this data later in the afternoon. Also due for release is the US ADP employment report, which should provide some advance indication ahead of Friday’s official payrolls report. 

 

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