The Takeaway: Australian Westpec Consumer Confidence Index rose 2.0% in March -> Domestic demand is key to offset the anticipated weakening export sector-> AUD/USD was marginally higher
The Australian Dollar was marginally higher against its counterparts after Australian Westpec Consumer Confidence index rose 2.0 percent to 110.5 in March, versus an increase of 7.7 percent in February. Although the rise of the sentiment index has slowed down, it still marks a third consecutive monthly increase of the index.
The uptrend of the index proves that rate cuts last year have boosted domestic demand and consumer confidence, yet the slower growth is consistent with the disappointing business confidence released yesterday. In fact, the Australian economic outlook is restrained by concerns over the world’s number-two economy, in which the recent fundamental releases from China all pointed towards a tightening monetary policy ahead. In February, the broadest measure of money supply (M2) retreated 0.7 percentage point and new yuan-denominated loan fell to 620 billion yuan. These conditions have fueled speculation that Chinese government may cap GDP growth in an effort to keep inflation under control, which stood at 3.2% in February. Therefore, given that the export sector is likely to hit a soft patch in the near term, the strength of domestic demand is key to the path of RBA easing policy.
Traders are expecting the RBA to hold interest rate steady on their next meeting on April 2.
The AUD/USD rose 7 pips after the report. At the time of writing, the Aussie dollar fetched US$1.03265, with resistance likely at 1.0338.
AUD/USD 1 Minute Chart
Chart Created by Robin Leung using Marketscope 2.0
