The Takeaway: Australian Conference Board Leading Indicators fell slightly -> RBA's rate cut may help to improve consumer confidence -> AUD/USD fell

The Conference Board Leading Indicators for Australia fell slightly by 0.1 percent in December to 121.8, following a 0.2 percent decrease in November. Between June and December 2012, the six-month change in the leading economic index decreased by 1.2 percent. The composite index is calculated based on money supply, share prices, rural goods exports, building approvals, sales to inventories ratio, gross operating surplus, yield spread, and medium-term government bond yields.

The indicator suggests that growth prospect was suppressed by concerns over the sluggish mining sector and softening labor market. Among the eight components, yield spread decreased at a slower pace in December, reporting a -0.02% versus a -0.16%. The increase in government bond yield is largely due to the concerns over Australian economic outlook and the recent appreciation of the Australian dollar versus the weakening yen, as the Japanese is the largest investor in the Australian government bond market. Therefore, changes in their holdings will affect the yield substantially.

The AUD/USD was little changed initially but dropped 10 pips 30 minutes later. At the time of writing, the currency pair is trading at 1.0344.

AUD/USD 1 Minute Chart

Forex_News_Aussie_fell_on_Negative_Leading_Indicators_body_Picture_1.png, Forex News: Aussie Falls on Negative Leading Indicators

Charted Created by Robin Leung using Marketscope 2.0