THE TAKEAWAY > New home sales in August rise 1.1 percent > Rise in detached home sales drives improvement from June and July figures > AUD unchanged
The Australian Dollar was largely unchanged following the release of data showing a rise in new home sales in August. As of 02:00 GMT, Aussie continued to test the resistance-turned-support level at 0.9850 after having broken through its previous trendline support.
Source: FXCM Strategy Trader
According to the Australian Housing Industry Association (HIA), new home sales rose 1.1 percent in August. Sales of detached homes drove the increase with a 1.5 percent rise, while sales of apartment units fell 2.2 percent. The August print represents a significant improvement from June and July, both of which saw declines of over 8 percent in the new home sales figure. However, Australia’s housing market remains under pressure from slumping consumer confidence – which is just emerging from a two-year low – and continued volatility in the equity markets.
Despite the current rebound – driven by a correction from last week’s market sell-off and hopes that Eurozone officials would take more aggressive measures to address the European debt crisis – the Aussie faces a number of headwinds in the medium term. Despite the RBA having struck a relatively hawkish tone in minutes released last week, overnight-index swaps continue to price in a 38 percent chance of a 25 bp cut in the benchmark cash-rate target at the central bank’s next meeting, scheduled for October 4. Over the next 12 months, the swaps are currently predicting over 135 bps of rate cuts, according to the Credit Suisse rate-expectations index. Meanwhile, signs of a manufacturing slowdown in Australia’s top export market, China, continue to weigh on the currency. With the most recent Purchasing Managers’ Index print (50.9) on the verge of contraction, and with the PMI figure in a steady decline throughout 2011, more downward pressure is in store for the Aussie.