The Australian Dollar to US Dollar (AUD/USD) exchange rate weakened to trade in the region of 78 cents on Wednesday as positive economic data out of the US sent the US Dollar climbing against the majority of its most traded peers and as speculation that the Reserve Bank of Australia (RBA) will cut interest rates weighed on the ‘Aussie’.
The Australian Dollar to US Dollar exchange was trading in the region of 0.7890.
Early in the session, Westpac Banking Corporation released data, showing that consumer sentiment in Australia increased by 6.4% in May to 102.4 points. The figure marks the first time since February that the sentiment index has climbed above the 100 points level. The main driver for the increase was the Federal Budget, which offered good news for Australians with mortgages.
‘This is a very strong result. The confidence of those respondents who hold a mortgage increased by a solid 4.8% although that rise was somewhat less than the overall lift for all respondents of 6.4%. The boost to confidence was apparent in all major states expect Western Australia where confidence actually fell by a concerning 7.7%,’ said Westpac chief economist Bill Evans.
The data was not enough to send the ‘Aussie’ higher however, instead the currency weakened as speculation increased that the RBA is not yet done cutting interest rates. The RBA’s Deputy Governor said on Tuesday that the central bank has the scope to cut rates if necessary to weaken the Australian Dollar.
The US Dollar, meanwhile, advanced strongly against the majority of its most traded peers as economic data released on Tuesday beat expectations and increased hopes that the world’s largest economy is trying to rebound from a run of weakness.
According to the Washington-based Commerce Department, US housing starts jumped by 20.2% to their highest level in nearly 7-1⁄2 years in April and building permits soared.
‘The stronger starts and permits data suggests that some real gauges of economic activity may finally be starting to accelerate during the spring, increasing optimism that the Fed may be on track to hike rates later this year,’ said an economist.
Investor attention will now be focused on the Federal Reserve’s policy meeting minutes due to be released later in the day. Also of interest will be the latest US MBA Mortgage Applications data.