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Talking Points

• The Australian service sector had a very strong December

• It scored the best month for nearly ten years, according to AIG

• The Australian Dollar’s focus looks to be elsewhere however

The Australian Dollar did not rise much against its generally perky US counterpart on Thursday, despite some very good news from the Australian service sector.

December activity there stormed to its highest level in nearly a decade judged by the Performance of Services Index from the Australian Industry Group (AIG). The index rose 6.6 points to 57.7. That was well above the key 50 level that separates expansion from contraction and the highest showing since May 2007.

Last month’s powerful rise follows more gradual gains seen in the previous two releases and suggests a strong start to 2017. All five sub-indexes rose in December; sales jumped 14 points to 62.1. New orders climbed by 6.4 points.

However, the Australian Dollar found it hard to capitalize on this latest piece of good news from the local economy. The currency plays many different roles in the foreign exchange market. Sometimes it is a China proxy, sometimes it is a play on commodity prices and sometimes the market is more focused on the “US Dollar” side of the AUD/USD pair.

This could well be the case now as investors look at every crumb of US data for clues as to whether the Federal Reserve’s apparent zeal to raise interest rates this year can be sustained. The blue-ribbon release of the month, official US labor statistics, is coming up on Friday.

AUD/USD hovered in the immediate aftermath of the release, but has since risen a little to 0.72824 from 0.72759 just before the numbers.

Delayed reaction? AUD/USD

Chart compiled using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

original source

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