Australian Q2 GDP printed at 0.6% versus 0.8% eyed as household spending proved weaker than expected and the news dragged Aussie below the 1.0200 level in early European trade. On a year over year basis Australian GDP increased by 3.7% registering its 21st consecutive year of growth. Treasurer Wayne Swan noted that, Australia’s 21 years of growth was “like winning 21 premierships in a row and winning the last four very, very comfortably”.

However currency markets focused on the marked slowdown in household consumption which rose only 0.3% versus 1.0% the quarter prior as consumers curtailed spending. The slowdown in final demand was evident in Monday’s Retail Sales which contracted sharply to -0.8% versus 0.3% expected gain.

Although the latest RBA statement suggests that Australian monetary policymakers are relatively sanguine, tonight’s Australian employment report could be the nail in the coffin for Aussie bulls who believe that the central bank will not move on rates for this year. The market anticipates labor rolls to slow their growth but nevertheless remain positive at 5.1K gain. However, if employment turns negative, the pressure on the RBA to respond will increase significantly as authorities will likely become far more accommodative in order to avoid the risk of economic contraction.

Aussie remained weak in morning European dealing as it traded below 1he 1.0200 level and may drift lower to test the 1.0150 barrier if risk sentiment continues to be negative as the day proceeds.