AUD/USD: Stable on Lukewarm Australian Data

AUD/USD is stable on Thursday, as the pair trades in the high-0.93 range early in the North American session. Australian data was unimpressive, as the CB Leading Index posted a weak gain and NAB Quarterly Business Confidence softened in June. In the US, Unemployment Claims enjoyed another strong week, but Building Permits fell shy of the estimate. There was good news in from the manufacturing sector, as the Philly Fed Manufacturing Index climbed to its highest level in over three years.

US Unemployment Claims dropped slightly to 302 thousand, beating the estimate of 310 thousand. This figure marks a seven-week low, as the economy continues to churn out impressive employment data. At the same time, the housing sector is struggling, and Building Permits fell to 0.96 million, its lowest level since January. The markets had expected a much stronger reading, with an estimate of 1.04M. Housing Starts followed suit, coming in at 0.89 million, compared to an estimate of 1.02 million. Finally, the Philly Fed Manufacturing Index sparkled, jumping to 23.9 points, well above the estimate of 15.6 and its best showing since February 2011.

Federal Reserve Chair Janet Yellen concluded two days of testimony on Capitol Hill on Wednesday, testifying before the House Financial Services Committee. Yellen declined to answer questions about when the Fed would begin to raise rates, but she did acknowledge that most economists expect the Fed to make a move in the third quarter of 2015. On Tuesday, the dollar moved higher when Yellen said that the economy still required monetary stimulus, but rates could increase sooner than expected if inflation and job numbers improved more quickly than anticipated. The Fed's asset purchase program (QE) has flooded the economy with over $2 trillion, keeping interest rates at ultra-low levels, but the Fed has been steadily reducing the program since last December. Currently, the Fed is pumping $45 billion/month into the economy, and the next taper is expected in August, with plans to terminate QE in October.

Recent US inflation numbers have been weak, so the markets were pleasantly surprised with the June release of the Producer Price index, the primary gauge of inflation in the manufacturing sector. The index improved to 0.4%, beating the estimate of.0.2%. Core PPI, which excludes volatile items, posted a weak gain of 0.2%, matching the estimate. With Janet Yellen telling Congress that a rate hike could be pushed forward if inflation and employment data exceeds expectations, if inflation data continues to beat expectations, there will put more pressure on the Fed to raise rates.

In Australia, the important CB Leading Index continues to struggle, as the indicator posted a weak gain of 0.2% last month. This was the first reading above the zero level since March. NAB Quarterly Business Confidence came in at 6 points in the second quarter. This was down from the previous reading of 7 points, which was upwardly revised from a previously estimated reading of 6 points. Despite the unimpressive readings, the Aussie is holding its own against the US dollar on Thursday.

The RBA released the minutes of its last policy meeting on Tuesday. The central bank didn't squander the opportunity to take a swiped at the high value of the Australian dollar, as the minutes noted that the exchange rate "remained high by historical standards" and was hampering attempts to achieve balanced growth in the economy. The RBA has sent out this message before, but the Aussie has been able to recover quite quickly from any losses which occurred following such statements.

AUD/USD 0.9374 H: 0.9392 L: 0.9353