THE TAKEAWAY: Australia’s Performance of Construction Index edged higher to 35.3 in May > Improvement fails to dent RBA rate cut expectations > AUD/USD Flat
Australia’s Performance of Construction Index rose to 35.3 in May from 35.2 in April, according to AiG. Despite the small improvement, the reading continues to point to a shrinking home-building sector. Australia’s economy has shown worrying signs in recent months, partly mirroring a slowdown in China. The East Asian giant is Australia’s largest trading partner and a key source of demand for its pivotal mining industry.
The AiG Performance of Construction Index (PCI) is an economic indicator derived from surveys that track various construction related orders, deliveries and costs. It provides an overview of activity in the Australian residential, commercial and engineering construction sectors. Readings below 50.0 indicate contracting sector activity, while those above 50.0 point to expansion.
AUD/USD (5-Minute Chart)
Source: FXCM Marketscope
AUD/USD remained relatively flat following the PCI release as traders focused on the upcoming US Employment report due later in the day. Investors are looking to the release to shape expectations for the timing of a possible tapering of Federal Reserve stimulus efforts. A strong jobs growth figure is likely to fuel speculation about a near-term cutback in the size of asset purchases, weighing on risk appetite and putting downward pressure on the sentiment-sensitive Aussie. Alternatively, a soft result is likely to yield the opposite result.
Written by:
Ilya Spivak, Currency Strategist for DailyFX
Gregory Marks, DailyFX Research Team
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.
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