Australian Dollar Holds Up After Upbeat New Home Sales

Talking Points:

• Australian new home sales rose for a second straight month in May
• There was as ever strong regional variation in performance however
• The Australian Dollar had been firming before the data and carried on after it

Get your Australian Dollar strategy in shape with the DailyFX trading guide.

The Australian Dollar firmed up a little Thursday on news that new home sales rose for a second straight month in its homeland.

The Housing Industry Association said that sales rose 1.1% in May, after a 0.8% April rise. It noted still-stark “geographical differences” in sales action, with very robust increases in Queensland and New South Wales contrasting with a much more sedate time in Victoria and Western Australia.

The Australian Dollar continued to gain against a generally weaker US version after the numbers.

Australian interest rates remain at record lows and are thought likely to stay there at least for the rest of this year and into next. However, the Reserve Bank of Australia is known to be closely watching housing market developments. Along with those in the labor market they are the key drivers of its monetary thinking, according to most recent statements.

These latest numbers underline once again the RBA’s problem with the housing market. Current, very low rates have led to an uneven housing boom. For the moment the RBA appears content to let them run given perceived labor-market slack and inflation weakness.

--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX