Australian Dollar (AUD) Exchange Rates Climb on Falling AUS Home Loans
The Australian Dollar US Dollar (AUD/USD) exchange rate climbed on Monday, supported by recent data that showed falling home loans and investment lending figures.
Australia’s December borrowing figures suffered a sharp decline on the month, with home loans falling from 2.1% to -2.3%, significantly below the forecast -1.0%.
This disappointing reading could help provide some comfort to the Reserve Bank of Australia (RBA), with the central bank having recently revealed concern over the high levels of household debt and ongoing weak wage growth.
Despite this positivity an interest rate hike from the RBA will likely remain on hold until the bank has clear indication of rising wages (keep an eye on next week’s wage figures) and accelerated growth in consumer prices.
Nonetheless, this news proved sufficient in supporting the AUD/USD exchange rate, particularly with the ‘Greenback’ currently struggling amid the release of the US infrastructure plan.
US Infrastructure Plan Unveiled – USD Exchange Rates Fail to Find Support
US President Donald Trump’s highly anticipated infrastructure plan was revealed today – a plan that aims to rehabilitate the nation’s roads, bridges, tunnels, ports and a whole lot more.
The plan will include $200bn in federal funding spread over the next 10 years, with an aim to raise $1.5tn in total by incentivizing investment from local, and state governments.
Another massive focus is the streamlining of the approval process for larger projects with a significant removal of regulatory red tape.
The White House hopes that this will streamline projects to two years – down from five – and hopefully foster economic growth.
The primary backlash has been on the environmental front, with some Democrats concerned that the shortening of approval times will skirt environmental regulations, though markets are also sceptical that the plan will make it through Congress, particularly after having suffered 2 government shutdowns due to disagreement and infighting.
Nonetheless, whilst this immediate scepticism has limited the upward potential of the US Dollar (USD), many analysts are optimistic about the infrastructure plan and the positive effects it could have if passed.
Jay Timmons, President of the National Association of Manufacturers, for example, thanked President Trump for ‘providing the leadership we have desperately needed to reclaim our rightful place as global leader on true 21st-century infrastructure’.
AUD/USD Exchange Rate Forecast: Australian Employment and US Inflation in the Spotlight
The Australian Dollar US Dollar (AUD/USD) exchange rate could encounter increased volatility this week as markets react to the US inflation readings, due on Wednesday, and Australia’s employment figures, due on Thursday.
Markets are currently expecting US consumer prices to slip year-on-year in January from 2.1% to 1.9%, with the core reading (excluding food and energy) also forecast to slip from 1.8% to 1.7%.
Soft inflation has been an ongoing issue for the US Federal Reserve, with consumer price growth continuing to remain below the central bank’s target range.
In this sense another drop could scupper plans for a rate hike in March, an event that could curb demand for the US Dollar.
If consumer prices prove better than expected, however, then the AUD/USD exchange rate could come under renewed pressure.
Thursday’s Australian employment readings will also prove salient, though the unemployment rate is currently expected to remain steady at 5.5%.
A print above or below this could knock the AUD/USD exchange rate either way, however, particularly as wage growth is highly dependent on a tightening labour market.