Intraday Market Thoughts

Is the Australian Investment Boom Over?

by Adam Button
Feb 27, 2013 23:59

The Australian dollar has struggled since mid-January on talk that investment is cooling. As a result, today's quarterly capex numbers will be closely inspected. 12 Premium trades are currently in progress. 1 EURJPY and 1 USDJPY have hit all targets. See latest Premium Insights on here:

The top performer on Wednesday was euro as it retraced a portion of Monday's decline. The yen was the laggard.

Economic news continues to point to a better turn in the US economy. On Wednesday, it was core capital goods orders, which rose 6.3% -- much better than the flat reading expected. In addition, the data showed a 13% jump in machinery orders, which suggests companies are investing.

Central bankers continued with a dovish tone. Bernanke re-iterated his comments in his second day of testimony while Draghi said the ECB is 'far' from exiting extraordinary policies.

The focus now shifts to Australia with the Q4 report on capital expenditures at 0030 GMT. Capex is expected up 1.0%. Other than a slight dip in Q4 2011, capex has risen every quarter since Q2-2010, including a 15% rise in Q3 2011.The RBA has warned about the end of the investment boom but there is residual strength in LNG projects. However, if this number falls below zero it could be the nail in the coffin of the AUD bull market.

Other events on the calendar include Japanese industrial production, Australian HIA home sales and the expected nomination announcements for the BOJ. Overall it will be a busy day in the region that could be further skewed by month-end.

Act Exp Prev GMT
FOMC's Raskin Speech
Feb 28 17:30
Industrial Production (m/m)
1.0% 1.5% 2.4% Feb 27 23:50
Pending Home Sales (JAN) (m/m)
4.5% 1.5% -1.9% Feb 27 15:00
Pending Home Sales (JAN) (y/y)
9.5% 6.9% Feb 27 15:00
Cap Goods Orders Nondef Ex Air (JAN)
6.3% 0.0% -0.3% Feb 27 13:30
Cap Goods Ship Nondef Ex Air (JAN)
-1.0% -1.3% 0.2% Feb 27 13:30
Private Capital Expenditure (Q4)
1.0% 2.8% Feb 28 0:30

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