Australian dollar edges higher as economic news supports
- Household spending rose a solid 0.8% in June as drivers responded to high petrol prices by buying new electric vehicles
SYDNEY: The Australian dollar inched higher on Tuesday as an upbeat reading on consumer spending suggested demand was holding up in the face of higher borrowing costs, providing scope for a further rate hike if needed.
Household spending rose a solid 0.8% in June as drivers responded to high petrol prices by buying new electric vehicles, Australian Bureau of Statistics data showed.
Spending growth for the whole June quarter slowed a tick to 0.7% in real terms.
Other figures showed job advertisements increased by 0.8% in June, pointing to resilience in labour demand.
The growth in spending comes even as surveys show consumer sentiment is in the doldrums following three rate rises from the Reserve Bank of Australia this year.
“Bearing in mind the data doesn’t reflect the full term of rate hikes, today’s print shows consumers are still spending at a decent clip,” said Harry McAuley, an economist for Oxford Economics Australia.
“The reasonably strong growth in quarterly volumes gives the RBA a little more ammunition should they decide they need it.”
Markets have priced out almost any chance of a rate rise from the RBA at its policy meeting next week, and little prospect of a move in September either.
Analysts suspect the central bank will stick with a hawkish stance and warn that rates might still have to increase again should inflation prove stubborn over the third quarter.
The Aussie added 0.2% to $0.7015, having eased 0.3% overnight and away from a top of $0.7069. Support lies at $0.6922 with resistance up at $0.7088.
Much of the seesaw action was driven by the fallout from Japanese and US intervention to support the yen, which saw the greenback slide broadly early on Monday before bouncing later in the session.
That left the Aussie flat at 110.00 yen, having been as high as 114.66 at one point last week.
The kiwi dollar idled at $0.5865, after also losing 0.3% overnight.
Resistance comes at the two-month high of $0.5907, with support at $0.5762.
The main event in New Zealand will be labour data on Wednesday where analysts look for the unemployment rate to tick up to 5.4% in the June quarter, on modest jobs growth of 0.2%.
The Reserve Bank of New Zealand has already signalled further hikes are likely, leaving markets fully priced for another 50 basis points of tightening this year.