Investing.com – The Australian dollar held slightly weaker even after second quarter GDP data on Wednesday from top trading partner China was better than expected
China said second quarter GDP rose 7.5%, beating expectations of a 7.4% gain, Industrial output rose 8.8%, while first half retail sales rose 12.1% and fixed-asset investment increased 17.3% in the same period.
Earlier, Australia’s Westpac-MI Leading Index for June rose 0.07 point to 98.20, in line with Reserve Bank of Australia expectations.
“The Reserve Bank Board next meets on August 5. The minutes from the July Board meeting confirmed that the RBA continues to expect to hold rates
steady. That seems to be the most prudent approach. Certainly the Leading Index is not indicating an imminent period of growth that might force the Bank’s hand to raise rates. The real issue is how long the recent shock to confidence from the May Federal Budget constrains the consumer. We expect that through the remainder of the year the consumer will begin a steady lift in confidence and activity as concerns around the budget dissipate. Such a scenario points to at least another year of steady rates. We do not expect to see a rate hike until August next year,” said Westpac’s chief economist Bill Evans.
AUD/USD traded at 0.9360, down 0.11%, after thee domestic data and the China figures – a major driver for Australian markets as the country is a top export destination for many commodities such as iron ore.
Earlier, New Zealand reported second quarter CPI data that showed a gain of 0.3% month-on-month at 1045 local time (2245 GMT), with expectations for an increase of 0.4%.
NZD/USD traded at 0.8726, down 0.49%, after the data.
Overnight, the dollar firmed against most major currencies after Federal Reserve Chair Janet Yellen told U.S. lawmakers that the economy is improving despite slack in the labor market, though momentum stocks may have grown a little frothy.
Yellen told the Senate Banking Committee earlier that rates are likely to remain on hold for a considerable period after the bank’s quantitative easing program ends, though her observation that small-cap, biotech and other momentum stock valuations appear “stretched” gave the dollar support, leaving investors to conclude that interest rates could rise sooner than later if the labor market improves.
Yellen’s comments overshadowed mixed U.S. data, which depicted an economy that continues to recover albeit on a road with lingering potholes.
The Commerce Department reported that U.S. retail sales rose just 0.2% in June, below forecasts for a 0.6% increase. Retail sales for May, however, were revised up to 0.5% from a previously reported 0.3%.
A separate report showed that manufacturing activity in New York state rose to a four-year high this month. The Empire state manufacturing index rose to 25.6 in July from 19.3 in June. Analysts had expected the index to decline to 17.0.
The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.01% at 80.45.
On Wednesday, the U.S. is to release reports on producer price inflation and industrial production. Meanwhile, Fed Chair Janet Yellen Carney is to testify on monetary policy before the House Financial Services Committee.