Australian dollar awaits durable goods report

Financial and commodity markets analytics

The Australian dollar hit a 2 month high yesterday brushing off positive housing and inflation data out of the US.

At 10.19am (GMT) the Aussie dollar was fetching US78.71c after reaching a daily high of US78.39c in yesterday’s trade.

The jump in the local currency was surprising given the latest real estate data from the US which showed the sales of new homes rose at its fastest pace in 7 years.

Inflation rose from a seasonally adjusted 1.6% last month to 1.7% firmly giving the US Federal Reserve food for thought, as the contemplate a move on interest rates.

Inflation figures have been one of the reasons the Fed has been reluctant to lift rates but with this slight increase a move in June may now be back on the table.

 All eyes will be on the latest durable goods number from the US due out later today which shows sales of big ticket items to American consumers and may add another notch in the case for an interest rate rise sooner rather than later.

In a note to their clients, analysts from National Australia Bank mentioned that the Fed has taken a wait and see approach in regards to monetary policy which has given some temporary relief to the Australian dollar.

But looking at the big picture, the price of Iron ore, Australia’s biggest export is still on the decline and the Aussie dollar will inevitably drift lower as the year unfolds.

“Ongoing pressure on Australia’s terms of trade led by the relentless decline in iron ore prices argue for still lower AUD levels, but the pressure on AUD/USD from Fed policy tightening are lessened. We maintain our 0.74 end-2015 and 0.73 early 2016 forecasts,” they noted.


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