The Australian Dollar to US Dollar (AUD/USD) Exchange Rate has been experiencing a relatively stable session of trading for the early part of this week with a lack of high tiered data locally and internationally to provide it with any significant market volatility after the significant market movements experienced last week against most majors.
The Australian Bureau of Statistics released the first 2015 quarter’s Residential Property Price Index, which provides an indication of the changes in housing pricing throughout Australia. The overall result was less than the forecasted result of 2.2% at a result of 1.6%, the forecast was an improvement on the previous quarter which was at 2.0% and the latest result was unable to keep the pace constant with the previous quarter.
Not surprisingly the majority of the rise in prices was driven by Sydney, which had an increase of 3.1%. Darwin and Perth were both showing figures in the negatives for the quarter, whilst other capitals appear to have remained relatively flat in relation to any change.
St George Bank Economist Hans Kunnen discussed the issue of the housing price bubble in Sydney, ‘Sydney is standing out like a sore thumb,’ he explained that this situation is going to be difficult for the Reserve Bank of Australia and regulatory bodies to address in the short term, ‘There are certain constraints in Sydney that aren’t going away any time soon: population growth, low interest rates, self-managed super funds investing, foreign demand and a lack of supply.’
At the last Official Cash Rate (OCR) decision the RBA Governor Glenn Steven’s focused on the housing pricing concerns, mentioning that ‘conditions in the established housing market had continued to vary across the country’, specifically making mention of pricing in Sydney and Melbourne of key concern. Following on from this Governor Steven’s was reported by media this month as stating that he considered part of the Sydney housing market as ‘crazy’.
The RBA are focused on talking the ‘Aussie’ down with their preferred range of the Australian Dollar to US Dollar (AUDUSD) Exchange rate between 0.70 to 0.750 US Cents. The OCR is now at historic low of 2% as of May and the RBA is running out of scope for movement on the OCR to stimulate the economy and lower the AUD/USD Exchange rate that is still trending stubbornly around the 77 US cent range. The latest release of Property pricing is indicative of this showing an over stimulated market in Sydney whilst other states are in negative growth rates.
It’s possible that the RBA is hoping that The Fed will resolve the issue for them with a possible Rate rise marked for later this year, however The Fed have consistently mentioned that this will be data dependant and the US economy appears to still be releasing mixed data in relation to the health of their economy.
Overnight the US released Core durable goods, manufacturing PMI and their own Residential Property Price Index, all of which were below the forecasted expectation, with durable goods in negative territory. New Home sales were released better than forecast however with the release in combination with pricing index lower than expected it shows that whilst there is an increase in the number of new homes bought the pricing average is not increasing as expected.
The mixed results overnight in the US were not enough for the AUD/USD Exchange rate to break its current range, making it to a low overnight of 76.75 US cents, however recovering and opening today at 77.35 US Cents at 8:00 AM AEST Today.