AUD/USD Fundamental Forecast – September 12, 2016

The AUD/USD continued to climb on more weakness in the US dollar. The Aussie added 5 points to 0.7648 ignoring disappointing data from China as consumer inflation printed well below expectations. In Australia the local home loans report showed a significant fall in new loads as well as in investment house financing. Australian home loan lending — whether measured in dollar terms or number — fell modestly in July, partially reflecting fewer property transactions taking place despite recent house price gains.

According to data released by the Australian Bureau of Statistics earlier today, the value of housing finance dipped by 1.8% to $31.788 billion in July in seasonally adjusted terms, leaving it down 2.4% on the levels of a year earlier. By type of borrower, the value of loans to owner-occupiers fell by 3.1% to $19.946 billion.

Excluding refinancing, new lending tumbled by 4.5% to $13.047 billion. It was the smallest total since June 2015, and the largest percentage decline since January this year. It was 1.5% lower than the level in July 2015.

The ABS stresses that first home buyers are defined as people entering the home ownership market as owner-occupiers for the first time, with first-time investors excluded from the data.

In other words, first-time buyers purchasing for investment purposes, rather than to occupy, are not captured in the data.

China’s consumer price inflation slowed to its weakest pace in almost a year in August, pulled down by abating food costs, although an encouraging moderation in producer price deflation added to growing evidence of a steadying economy.

Indeed, the broader inflation trends shown in Friday’s data confirm recent signs of a more sure-footed recovery in the world’s second-biggest economy, allowing authorities to resist any fresh monetary easing as they move to curb an unsustainable buildup of credit in the financial system.

“The picture is still one of rising price pressures, and for that reason I’d be skeptical of claims this latest drop in inflation is going to increase the likelihood of further monetary easing by the central bank,” said Capital Economics’ China economist Julian Evans-Pritchard in Singapore.

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 September 12, 2016

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