The Australian Dollar to US Dollar (AUD/USD) exchange rate was trading close to a 6-week low on Monday as investors await the release of a plethora of economic data reports out of the US that are predicted to show that the world’s largest economy will recover in the second quarter. Last week the Australian Dollar fell sharply against the ‘Greenback’ as the Federal Reserve hinted that it was still on track to hike interest rates in September.
The ‘Aussie’ managed to slow its recent declines, and even regained some lost ground on Monday morning after a private index showed that the Australian manufacturing sector grew for the first time in half a year. The Australian Industry Group’s (AIG) Performance of Manufacturing Index rose from April’s figure of 48 to 52.3 in May. The data beat economist forecasts for a figure of 48.75. Among the individual components of the survey, exports, new orders, supplier deliveries and employment all expanded last month. The cause for the improved data was according to economists down to the recent fall in the value of the Australian Dollar.
Further gains were restrained however as a separate report released by the Australian Bureau of Statistics showed that the total number of building permits issued fell a seasonally adjusted -4.4% in April. The number of permits issued numbered just 18,715. Economists had forecast for a drop of -1.8% following the previous month’s upwardly revised March increase of 2.9%.
The currency was little changed following the release of mixed data releases out of China.
As the week progresses the Australian Dollar is likely to come under pressure, as important economic data releases out of the US will create volatility. Also in focus will be the situation in Greece and the standoff between the European Union and Russia. Athens is expected to miss a €300 million repayment to the International Monetary Fund (IMF) on Friday and nerves are likely to build, as the deadline gets closer. No deal is likely to be reached between Greece and its creditors causing Prime Minister Alexis Tsipras to threaten that his government will detonate a pan-European crisis if it is pushed any further.
Also of importance will be significant domestic data, which will include the Reserve Bank of Australia’s (RBA) latest interest rate decision and the publication of quarterly Gross Domestic Product (GDP) data.