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Australian Dollar Falls No Further On Weaker Leading Indicator

Australian Dollar Falls No Further On Weaker Leading Indicator

David Cottle, Analyst

Talking Points:

  • Westpac’s Australian leading index weakened in May
  • However, the Aussie Dollar had already been knocked by Moody’s shock China downgrade
  • Bears didn’t ask for any more

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The Australian Dollar was steady Wednesday despite the release of a key leading indicator which weakened this month.

The Westpac Leading Index for May slipped by 0.12% on the month, following a wafer-thin rise of 0.08% in April. This index is aggregated from nine sub-indicators of economic activity and is meant to provide a timely steer on overall economic growth. May’s was the first fall for eight months, but that bald fact disguises a lackluster twelve month run, which has seen plenty of flat months.

The numbers make uncomfortable reading for policy makers and investors but were released about the same time as news broke of a shock credit-rating downgrade for China. Obviously, China is a major commodity export destination for Australia’s raw materials. However, with AUD/USD already lower in response to Moody’s move, it seems there was little further selling after Westpac made its call.

The Reserve Bank of Australia for its part seems to be looking more at Australian house prices and wage levels as its immediate monetary policy markers. Like other commodity-linked central banks it has fretted that overseas support such as that from China may fade. Local interest-rates are already at record lows and not expected to rise this year.

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.