Westpac with commentary on the Australian dollar after the larger than expected trade deficit
- The key take-out is that the terms of trade, which fell -2.3%qtr, -10.4%yr in Q3, has weakened further at the start of the December quarter. This sizeable retracement in the terms of trade is squeezing national income, adversely impacting businesses, households and governments.
Strategy for the AUD
- AUD/USD had been drifting lower over the morning, from 0.7310 to just under 0.7300 as the trade data was released.
- The much bigger than expected deficit sparked a drop to AUD/USD 0.7284 lows.
- Support around 0.7250 may be tested on the day if Asian equities follow Wall Street's gloomy lead.
- But the ECB decision tonight remains the global focus, arguing for some caution.
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Via WPAC economist Andrew Hanlan
