Australian Dollar Surges Despite Wednesday’s Underwhelming Data

The Australian dollar surged against other most-traded currencies today. With Wednesday’s domestic macroeconomic data being negative, it is hard to tell what the reason for the sharp rally was. One of the possible factors boosting the Aussie were hopes for a delay of US tariffs on Chinese goods that should kick in on December 15.
The Westpac-Melbourne Institute Index of Consumer Sentiment dropped by 1.9% in December after jumping by 4.5% in November. The report commented on the result:

This poor performance of the Index is broadly consistent with the sharp deterioration we saw in consumer spending in the September quarter as reported in the national accounts and the early evidence of weak retail conditions for the start of the December quarter.

Released yesterday by the Australian Bureau of Statistics, the House Price Index demonstrated a rally by 2.4% in the September quarter from the previous three months. That was a far better result than an increase of 0.5% predicted by analysts and a drop of 0.7% registered in the June quarter.
National Australia Bank reported yesterday that the business conditions index remained unchanged at +4 in November, while the business confidence index fell from +2 in October to 0 last month. Alan Oster, NAB Group Chief Economist, talked about the gap between different industries:

While conditions appear to have stabilised in aggregate, the gap between the worst performing industries – the goods related industries – and services widened further. Mining has also weakened substantially in recent months after having been the standout industry in the survey for some time. Also, unsurprisingly construction and manufacturing are at modest levels with the slowdown in housing construction and global confidence key headwinds.

Oster added further:

The business survey has mirrored the weakening in private sector demand over the past year or so. Retail, wholesale and transport & utilities are currently very weak and reflect the moribund consumer sector with official data also showing the weakest outcomes there since the early 1990s. Also reflected in the survey are the trends in construction and manufacturing in the economy more broadly. So while public sector spending has been a key support to growth over the last year, we are not seeing as many spill-overs as hoped into private sector business confidence – it appears to be more affected by the weak consumer at present.

AUD/USD surged from 0.6809 to 0.6886 as of 17:14 GMT today. EUR/AUD slumped from 1.6287 to 1.6157. AUD/JPY jumped from 74.02 to 74.60.

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