A second round of releases in the lower stratus of importance awaits Aussie traders this week, providing little fundamental basis for a rally in the unit severely needed given the 380 point decline against the dollar since last month. After last weeks red candle the Aussie has now fallen six consecutive weeks in a row off of the high of the year set on May 12 at 0.7795. Looking to whats ahead, Tuesdays 00:00 GMT release of the Conference Boards Australia Leading Index for April will be the first piece of data to hit the wires.
Used as a Forecast of growth for the coming three to six months, much of the indicators sway will be lost in the fact that many of the components have been posted or there are related reads already in the market. Following this Tuesdays number the remainder of the weeks gauges will take a step down in importance. Wednesday sees the proprietary measure of the Housing Industry Associations May New Home Sales. A number of factors will be weighing on the sales figure. Inflation in May accelerated outside of the RBAs 3.0% target rate, potentially sparking fears of another hike on the back of the surprise 25 basis point rise on May 3; while April home loans actually fell 0.5% against an anticipated 0.8% rise. Next for the week, job vacancies are expected to increase 2.0%, after having risen 4.7% over the first quarter. The vacancy rate continues to decline, partly due to the overall strong domestic sector and also because of firms expanding capacity to meet their sudden demand for new hires that has driven the jobless rate down to 4.9%. Wrapping up the week, the final scheduled data sets are Thursdays releases of consumer spending on credit, which is expected to have slowed to a 1.1% growth pace last month. Aussies confidence in borrowing to make purchases is expected is well supported in a projection to slow after receiving the shock of higher overnight lending rates at the beginning of the month. Over all, this week is shaping up to be a disappointment in terms of economics, yet commodity prices and cross currency fluctuations should not be discounted in their ability to break the Australian dollar out of its six-week funk.
Last week saw a few positive indicators for the Aussie to rally on but the currency had already gained enough negative momentum to be turned of its path by an old leading index and housing starts. Probably the greatest hope for a strong rally rested with Westpacs measure of leading economic indicators. Month over month the index for April reported a 0.6% rise, down slightly from 0.8% in March, but still strong reflective of respectable growth for the period. The number, which forecasts growth over the coming three to nine months, bodes well for an already improving domestic sector. After this indicator failed to rouse more than 30 points in aussie, the markets moved on to first quarter dwelling starts. Starts surprised strongly to the upside, surging 10.6% against a forecasted drop of -1.5% and compared to a downwardly revised fourth quarter 8.3% decline. The turnaround helps to undo the losses suffered at the end of 2005 and suggests positive consequences, or at least the tempering of a negative release for this weeks Housing Industry Associations figure. Even after this release, currency went on to loose 70 points against its US counterpart. This left many with few expectations for the month over month new motor vehicle sales for May. Failing to drum up any sentiment one way or another, sales reported in line with expectations at 0.5%, up from the revised 0.4% growth announced for April. The growth in April and May followed 2.2% and 2.3% declines in February and March, helping to correct some of the losses. The auto market has been very volatile with large leaps and falls from month to month, and as such the numbers can be somewhat difficult to interpret. The currency peaked late Wednesday night at 0.7425 before heading south to 0.7315 by the end of the week.
