Large Contractions in Australian Building Permits Weigh on AUD/NZD
The Australian Dollar New Zealand Dollar (AUD/NZD) exchange rate extended its losses on Thursday as domestic building approvals came in well below expectations.
At the time of writing AUD/NZD has fallen around 0.3%, extending the pairing’s losses to over a cent so far this week.
Australian Dollar (AUD) Weakened by Slump in Building Permits
The Australian Dollar remained on the defensive on Thursday morning as yesterday’s poor inflation figures continued to weigh on sentiment.
This also left the ‘Aussie’ susceptible to further losses later in the session as well, especially following the release of Australia’s latest Building Permit figures.
According to data published by the Australian Bureau of Statistics (ABS), building approvals contracted over 20% in December after previously growing 12.6% in November.
This was even lower that the expectations that approvals would contract 8% and was the lowest reading since July 2012.
The plunge was largely driven by a noticeable drop in residential construction projects, something which may concern investors given the sectors contribution to economic growth.
Diana Mousina, Senior Economist at AMP Capital said;
‘Australian residential construction has been an important driver of economic growth over recent years but the peak of this trend has passed as the housing market cools and demand for new dwellings eases.’
New Zealand Dollar (NZD)
At the same time while the New Zealand Dollar was able to advance against the Australian Dollar on the back of the week building approvals it is struggling a little more against many of the other majors.
The ‘Kiwi’s losses were main driven by a rally in the US Dollar (USD) in early trade as investors reacted to the Federal Reserve’s latest rate decision.
While rates were left on hold last month, Outgoing Fed Chair, Janet Yellen used her last policy review to stress the bank’s plans to raise US interest rates over the coming year.
AUD/NZD Forecast: NZ Consumer Confidence to Climb?
Looking ahead the AUD/NZD exchange rate may slide again on Friday as New Zealand publishes its latest consumer confidence figures.
Economists forecast the sentiment index will have risen from 121.8 to 122.4 in January as doubts over the new government begin to subside.
Meanwhile the focus for AUD investors is likely to turn to next week’s Services PMI, with an expected uptick in service sector activity last month, possibility prompting the Australian Dollar to rally.