Australian Dollar Gains On House Price Beat, Range Still Threatened
- Australian house prices rose ahead of expectations in 2017‘s final three months
- The Reserve Bank of Australia’s policy minutes added little to the post meeting statement
- Still, Aussie Dollar bulls found something to like
The Australian Dollar gained a little Tuesday following some stronger-than-expected house price data.
Prices rose by 1% on the quarter in the final three months of 2017, the Australian Bureau of Statistics said. That was much stronger than market consensus, which was for no change at all. On the year prices were up by 5%, again much stronger than the 3.9% rise expected but below the third-quarter’s 8.3% rise.
The minutes of the Reserve Bank of Australia’s last monetary policy meeting were released at the same time. They stuck with the line taken in the post-meeting statement, pointing to measurable if gradual progress toward inflation and growth goals. They also worried about the effect of a strong Australian Dollar on both growth and inflation, while fretting a lack of wage growth despite strong employment levels. Elevated consumer debt levels remain of concern too.
All up this was fairly typical fair and it would be unlikely if AUD/USD had moved on it. However, the strength in house prices may have been behind its gains. The RBA said that the housing market was cooling in the hotspots of Sydney and Melbourne while stabilizing elsewhere. It doesn’t look as though it will have much impact on monetary policy unless this benign prognosis changes.
On its broader daily chart AUD/USD remains stuck in the broad downtrend which has marked the time since it hit three-year highs back in January. The latest bout of weakness seems to have been caused by a fall in iron ore prices- that commodity being Australia’s biggest raw-material export.
However the currency is also under pressure thanks to the perception that interest rates are unlikely to rise from their record lows for some time. This week’s meeting of G20 finance ministers may also be viewed as a risk given the Aussie’s links to global growth sentiment. Failure to cool some of the rhetoric over tariffs may yet keep the currency under pressure.
AUD/USD seems to be breaking below the broad range which had contained trade since February 21. Assuming we see a conclusive break, then the lows of December in the 0.7636 area will come into focus.
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--- Written by David Cottle, DailyFX Research
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DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.