Even though risk appetite has strengthened due to uncertainty over the outlook of the Federal Reserve, the appeal of the ‘Aussie’ has remained muted, thanks to discouraging domestic data.
This Week’s Australian Dollar Exchange Rates:
Pound Sterling to Australian Dollar (GBP/AUD) –
Week’s High: 1.7411
Week’s Low: 1.6923
US Dollar to Australian Dollar (USD/AUD) –
Week’s High: 1.3184
Week’s Low: 1.2959
Euro to Australian Dollar (EUR/AUD) –
Week’s High: 1.4880
Week’s Low: 1.4667
New Zealand Dollar to Australian Dollar (NZD/AUD)
Week’s High: 0.9610
Week’s Low: 0.9454
AUD Exchange Rates Dented by Weak Construction Output
Despite the ANZ Roy Morgan Weekly Consumer Confidence Index showing a continued improvement in domestic sentiment this was not enough to boost the ‘Aussie’ at the beginning of the week. Risk appetite was weakened by more disappointing Chinese data, which pointed towards a continued slowing in the world’s second largest economy. This weighed heavily on commodity prices, driving the antipodean currency lower against its rivals.
Even though this was shortly followed by a larger-than-expected contraction in second quarter Australian construction output, the ‘Aussie’ soon began to regain its steam. Speculation that the Federal Reserve could raise interest rates before the end of the year began to die back somewhat over the course of the week, encouraging investors to move back into higher-yielding currencies.
Confidence in the Australian Dollar remains volatile nonetheless, as worries are continuing to mount over the outlook of the domestic property market. With house prices still rising and construction falling the antipodean currency is likely to remain under pressure.
Hot Housing Market Predicted to Put Pressure on Australian Dollar
With that in mind, investors are likely to pay close attention to next week’s building permits and new home sales data for July. If signs continue to point towards a heating market then investors are expected to take a more cautious view of the Australian Dollar. That said, a desire to curb rampant house prices would seem to conflict with further monetary easing from the Reserve Bank of Australia (RBA), something investors should view positively.
Further weakness could come on the back of the latest Manufacturing PMI, which is predicted to have dropped from 56.4 to 53.1. Should the domestic economy be indicated to be slowing the ‘Aussie’ could see more of its recent gains erased.