The AUD USD exchange rate fluctuated today as markets digested a run of mixed US data prints, yesterday’s speech from Reserve Bank of Australia (RBA) Governor Philip Lowe and some positive construction figures from Australia.
US Data Proves Mixed, USD Exchange Rates Flounder
Data from the United States today proved quite mixed today, with US durable goods orders contracting after three straight months of gains and jobless claims also falling.
New orders for US-made capital goods fell in October by -1.2%, down from the previous period’s 2.2% gain and the forecast of a 0.4% rise.
The shipment of core capital goods, however, advanced 0.4% in October, still down from September’s 1.2% figure but pointing to strong momentum for the US economy as the year comes to its end.
In other news, the number of Americans filing for unemployment benefits dropped to 239k in the week ending November the 18th, down from the previous period’s 252k and below the consensus of 240k. This news pointed to steady job growth after the run of late-summer storms, and ultimately helped buoy the US Dollar against the poor durable goods orders figures.
Australian Construction Work Smashes Forecasts, AUD Exchange Rates Fail to Capitalise
Australian construction activity climbed in the September quarter, according to the Australian Bureau of Statistics (ABS), with the total value of construction work surging 15.7% to hit $61.863bn, smashing the market expectation of a -2.3% contraction.
This marked the largest quarterly total for this reading on record – breezing past 2012’s Q4 peak caused by the mining infrastructure boom.
Despite being overwhelmingly bullish, however, various economists have been quick to critique the reality of the reading.
Tom Kennedy, Economist at JP Morgan stated:
‘This is an implausibly large increase and is unlikely to represent genuine real domestic value add. Instead, we suspect today’s out performance reflects the ABS’ policy of marking the full value of mining related structures as ‘work done’ in one lump when installation is completed, rather than incrementally over time’.
This consideration undermined the figures, eventually pushing the AUD USD exchange rate back towards steady levels.
AUD USD Outlook Limited by Imminent FOMC Minutes
The outlook for AUD USD currently remains one of limitation, with the US Federal Open Market Committee (FOMC) meeting minutes that are due later this evening predicted by many to provide a positive outlook for the US economy.
In addition, the US Fed is currently considered to be the more hawkish option when compared to the cautious RBA (with many predicting a third and final rate hike in December).
Combined with the Republican tax reform legislation picking up pace (reform that could foster massive economic growth) the outlook for the AUD USD exchange rate remains firmly in the ‘Greenback’s’ favour.