Australian Dollar Lower as Business Survey Confirms a Deterioration in Confidence
Australian Business Conditions softened for the third month in a row after the release of Business Confidence in January; ANZ provide their analisis of the data.
January was the third month in a row in which NAB's Business Conditions survey showed a further downturn in confidence.
The survey measures the percentage difference between respondents who think conditions have improved to those who think they has worsened, and is an average, “of trading, profitability and employment indices, reported by respondents for their company,” for the “up and coming month.”
"Without blowing our own trumpet too hard, the NAB survey provides a very up to date view of business confidence and conditions with its tracking of the domestic economy," says a note from NAB illustrating why currency markets are taking note.
In November 2015 the confidence survey gave a result 5, in December 2, and in January 2 again confirming a negative trend.
Business conditions, meanwhile, fell from 10 in November, to 6 in December and 5 in January.
The Australian dollar to U.S dollar exchange rate reacted by weakening by 5 basis points in the five minutes following the release of the data, however, AUD/USD fell over 30 points, from 0.7067 to 0.7028, in the half hour after the release.
The pound to Australian dollar exchange rate meanwhile rose to 2.050, up from the previous day's close of 2.0355.
Bank transfers are still being offered below 2.0 though while independent specialists are conducting UK - Australia payments higher at 2.02.
No doubt, the hefty share price declines witnessed in Asia will have also contributed to the move lower in the Aussie.
According to ANZ Bank, part of the reasons for the negative reaction was that the fall-off in Business Conditions was so “broadly-based”:
“Business profitability softened, signalling that the recent strength in measured employment growth is likely to ease going forward.
“Trading conditions also declined further and are now at 12-month lows.
“Further, the softening in conditions was spread across sectors, with all industries outside transport recording a fall in business conditions.”
The ANZ response goes on to suggest that although Capacity Utilization rose from December, it remained well below levels reached in 2015:
“Firms continue to report ample spare capacity, consistent with our outlook of sluggish non-mining investment as capacity constraints are not a hindrance to activity.”
The research note also remarks that Business Confidence remains, “subdued” as the softer global business environment and financial market volatility weighs on Australian firms.
