Aussie shrugs off weak confidence data

The Australian dollar is in positive territory in the Wednesday session. In the North American session, AUD/USD is trading at 0.7752, up 0.18% on the day.

Business and consumer confidence data soften

Australia has performed very well in the prolonged battle against the Covid pandemic, and the economic recovery continues to deepen. Australia’s GDP has now risen to pre-Covid levels.

On Wednesday, however, Australian confidence data was mixed. The NAB Business Confidence Index slowed to 20 points in May, down from 23 and shy of the estimate of 21 points. Despite this drop, business confidence remains at high levels, and will likely increase in the coming months, barring any unforeseen resurgence of Covid.

Westpac Consumer confidence sparkled in April, hitting an 11-year high, but it has been all downhill since then. In June, the indicator fell 5.2% to 107.2, down from 113.1 in May. This follows a decline of -4.8% in May. The survey was conducted during the lockdown in Melbourne, so it’s no surprise that consumers were in a sour mood as they once again faced strict health restrictions. The Westpac report noted that when the RBA meets next on July 6, Governor Lowe will hold a press conference after the meeting, which could mean an important announcement of policy changes. If the RBA does announce a tightening of policy, the Australian dollar is likely to respond with gains.

Inflation will be on the mind of the markets on Thursday, as the US releases CPI for May. The April report showed a surge in inflation and triggered talk of a potential taper by Fed policymakers. The Fed has stuck to its script that the jump in inflation in transient and there are no plans to scale back QE. Still, if May’s CPI outperforms, we can expect the Fed to face louder calls to reconsider its dovish policy.

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AUD/USD Technical

• AUD/USD is putting pressure on resistance at 0.7777. Above, there is resistance at 0.7849
• On the downside, there are support levels at 0.7669 and 0.7593

For a look at all of today’s economic events, check out our economic calendar. www.marketpulse.com/economic-event

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