Australian Housing Sector on the Slide,

but Aussie Dollar Stays Put

Economic data indicates Australian housing is on the slide, but in spite of this the Aussie dollar has fared well against rivals.

Pure FX - 31.05.2011

  • GBPAUD - 1.5403 (1.5303 previous);
  • EURAUD - 1.3355 (1.3348 previous);
  • USDAUD - 0.9351 (0.9482 previous)

It's been a tough week in economic data. Results from the Australian housing and building sectors have both shown declines, while the Australian current account recorded an increased deficit in the first quarter of 2011.

In spite of this though, the Australian dollar has fared moderately against rivals, gaining more than 1.0% against the US dollar and remaining steadfast against the euro. This is chiefly down to increased risk appetite on the markets: as confidence in the global outlook increases, commodity currencies like the Australian dollar benefit. In fact the Australian dollar has lost just against sterling, giving up around 1.0% compared to a week ago.

In Australian data, it's possible the building and housing sectors could be suffering the after effects of the heavy floods in Queensland earlier this year. Growth in construction slowed to 0.7% in the first three months of 2011 according to the Australian Bureau of Statistics, compared to a nippier 1.4% growth previous.

New building permits meanwhile fell -1.3% last month, in addition to a -1.8% decline the month before. This negative data arguably contributed to an increase in Australia's current account deficit last quarter, rising to -$10.4bn from $8.1bn previous.

Looking ahead meanwhile, it's possible the situation in Greece could weigh in on the Australian dollar in coming days. Uncertainty regarding a Greek bailout could encourage the markets to seek safe havens, and so abandon riskier currencies like the Australian dollar.

Keep an eye then on the headlines about Greece to see how the markets react.

Peter Lavelle with foreign exchange specialist Pure FX.

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