The Australian dollar continued to rise fuelled by a strong consumer sentiment in August. The index jumped 3.5% for the August reading. Optimism about the economy is on the rise ahead of the September 7 election. The Reserve Bank of Australia cut interest rates which has lowered mortgage payments and helped the overall good economic vibe.
US Tapering fears are a concern for the AUD as well as some employment and wage data which suggest a weak Australian economy. So far the US Federal Reserver has not given any timelines surrounding the end of its QE program. There is market speculation that the program could start winding down in September or the end of the year. The biggest factor against that line of thinking is the fact that Bernanke will most likely not be at the head of the Fed beyond next year. The Fed might wait for after the succession to start its tapering and potential interest rate raise.
The Wage Price Index came in slightly lower than expected at 0.7% versus a 0.8% forecast. Employment and all of the related statistics are closely watched as one of the weakest points of the Australian economy. The slowdown in the Chinese demand has pressured the commodity exporting nation and its labour force.
The AUD/USD will test the 0.9140 resistance level and could advance more given the USD weakness. The pair is more stable after touching the 0.91 level and it now on an upwards trend. Positive Chinese data and local employment will give a boost to the pair.
- MI Inflation Expectations.
- RBA Assist Gov Debelle Speaks
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