The Australian dollar traded around $0.70, near multi-week highs as stronger-than-expected household spending reinforced signs of resilient domestic demand ahead of the Reserve Bank’s monetary policy meeting next week.
Household spending rose 0.8% in June, well above forecasts of 0.2%, driven by another increase in discretionary spending, while annual growth accelerated to 6.0%, also exceeding expectations.
The data supported the central bank’s view that consumer activity remains firm despite weak sentiment, although recent softer inflation and a cooling housing market have strengthened expectations that the central bank will leave its 4.35% cash rate unchanged next week.
Markets are also pricing little chance of a rate hike in September, while assigning roughly a 50% probability of a move in November if third-quarter inflation proves stronger than expected.
Investors now await upcoming final PMI figures and trade balance data this week for further clues on the economy’s health.