Investment lending for homes showed another contraction in yesterday morning’s release, falling by -1.7% for May, following the drop in April of -2.2% back in April. The release follows a long term, gradual downward trend in confidence within the property markets down under and has arguably been a contributing factor to the anchoring of the Australian dollar on the international stage.
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Growth within real estate is often used as a benchmark for investors and can be used as an indicator for long term sustainable confidence within an economy. The signs have been looking ominous for a while.
We have seen a loosening in mortgage lending standards recently, (approved by the Senate) which may well lead to a reversal in this trend and we could see appetite within the property market rekindle in the months ahead as a result. It could be something to look out for if you have a longer term requirement in the Australian dollar.
The fall in consumer inflation expectations overnight could have a more immediate impact on the AUD however Governor of the Reserve Bank of Australia Philip Low placed a positive spin on his expectation for inflation levels throughout the second half of the year, with an increase in petrol prices likely to pave a positive path. Last night’s release exposed an underlying lack of confidence amongst consumers however and adds another argument to the list of multiple rate cuts needed from the RBA in the months ahead and could ultimately hinder the Aussie dollar’s value.
Despite the weak data overnight, the pound has struggled to make any sustained gains against the AUD so far, highlighting the lack of faith in sterling at present as a result of the uncertainty coming from the conservative leadership battle and Brexit.
As Australia’s largest trading partner, China’s positive jump in imports of 8.3% year on year may well be providing further support to the Aussie dollar. This could be accelerated further at the start of next week with Key GDP data for the last quarter for China is expected to show another expansion. The release is due outside of trading hours on Monday morning and could bring volatility to exchange rates. Those in the market for AUD may wish to get in touch before the week comes to an end to discuss your options and limit your exposure.
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