Australian Home Sales Data Surprises AUD Traders

The Australian dollar (AUD/USD) traded higher this morning after data showing that new home sales rose for the second month in a row in Australia.

Data released by the Housing Industry Association showed that Australian home sales rose 1.1 percent in May. They were up 0.8 percent in April. The report took note of weaker “geographical differences” in sales action. The report noted strong increases in Queensland and New South Wales. There were much weaker sales in Victoria and Western Australia.

After the news hit the wires, the Australian dollar continued to move higher against an already weaker US dollar.

Australian Rates remain at Record Lows

The Reserve Bank o Australia is maintaining its official cash rate at a record low. These rates are more than likely to stay low for the rest of this year and into 2018. However, the Reserve Bank of Australia is closely watching housing market right now. Along with the housing sector and data in the labor market. These two sectors are the key drivers of its monetary thinking.

This new data reinforces the problem the RBA sees within the housing sector. Current ultra low rates have led to an uneven housing bubble. Right now, the RBA appears okay to allow these rates to continue thanks to a perceived slack in the labor market. Inflation data is also very weak right now.