Talking Points:
- Westpac’s leading index ticked higher in July
- However, it still indicates below-trend growth
- The Australian Dollar had been drifting upward but paused after the release
See how the trading community views the Australian Dollar’s prospects at the DailyFX Sentiment page !
The Australian Dollar’s modest climb stalled Wednesday despite the release of a more solid leading index of economic activity.
Westpac’s barometer came in at +0.12% for July, having fallen by 0.14% the month before. The index is compiled in association with the Melbourne Institute, an economic and social research house. It consists of data from local financial, housing and labour markets along with consumer expectations about activity, employment and global economic activity.
The Australian Dollar had been gently gaining on the greenback through the Asia Pacific morning, but the data seem to have curbed this process. Despite the uptick Westpac said that the index still points to below-trend near-term growth. Westpac assesses trend as being 2.75% and expects growth of 2.5% next year.
A more substantial hurdle will come on Thursday with the release of official Australian employment numbers. With the Reserve Bank of Australia especially concerned about stretched household balance sheets, the labor market is held by investors be far more closely plugged in to monetary policy action.
Please join us for love coverage of those key Australian employment numbers at 01:30 GMT Thursday via the DailyFX Webinars page.
The Aussie has been in retreat for a few days now on its daily chart, which is possibly not surprising given RBA officials’ relentless focus on the dangers of too much currency strength. AUD/USD remains close to two-year highs and the market can be reasonably sure that too much more sustained strength will attract at least the verbal disapproval of the central bank.
Whether there will be any more practical action is an open question. RBA Governor Philip Lowe said last week that he remains open to intervention in the market if moves were to become “extreme.” However, he added that in his view they were not so at the moment.
On its daily chart AUD/USD remains in a clear downtrend, exacerbated by general US Dollar strength in the last day or so thank to solid retail sales numbers.
--- Written by David Cottle, DailyFX Research
Contact and follow David on Twitter: @DavidCottleFX
