Australian dollar falls as ANZ cuts GDP forecast

See the latest Australian dollar analysis here:

Macro Afternoon

by Chris Becker

Things aren’t looking up for the Australian dollar with ANZ out with another downgrade of local economic growth, looking at a 2% drop for the third quarter due to the lockdown in Victoria:

  • with the whole of Melbourne metropolitan and Mitchell local government areas locked down, we estimate the rebound in activity we are looking for in Q3 will be as much as 1.5-2.0ppt lower than we expected.
  • This estimate reflects both the direct impact of the lockdown to around 20% of the economy, but also the impact on regional Victoria and on business and consumer confidence nationally.

It’s had somewhat of an effect on the Aussie, dropping out of tentatively held support at the mid 69’s versus the USD, now falling to the start of week level going into the afternoon trade:

Meanwhile, in response to the latest APRA pretend and extend scheme, Citi analysts still reckon all is hunky-dory with Megabank,  describing the regulator’s treatment of ‘performing loans’ as a distinct positive for the sector.

‘This announcement is incrementally positive to our view that milder than expected loan losses will drive higher than expected dividends out to FY22. We continue to expect stock prices to move higher on the attractiveness of their dividend yields,’ Citi analysts said.

They have a “Buy” on all the big four components of Megabank, interestingly with the once-Commonwealth CBA the least preferred (because most exposed?)

The XXJ financial sector remains poised here, not providing the hit the ASX200 requires to get moving back above 6000 points as momentum wanes:

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  1. High dividend yield?

    Err, maybe for a little while? Maybe that’s a reason for someone to buy them, but maybe not a very good one to hold them long, given the headwinds….can dividends hold up?

    • No. They’ll be forced to suspend them altogether eventually as their capital cushion comes under threat.