-NAB chief economist Alan Oster
The Aussie traded higher on Tuesday, with AUD/USD inching higher 0.03% to 0.9356, as domestic data and figures from China offered a brighter outlook for the economy.
A report from the National Australia Bank showed current business conditions and confidence diverged further last month, as confidence remained steady despite the recent release of the budget. At the same time, current conditions were supported by improvements in the labour market. A gauge of business confidence stood at 7 in May, after April's revised reading at 6, while the business conditions index plunged to –1 from zero a month earlier. The largest optimism comes from the construction sector, which reflects the increase in residential building commencements. Not a surprise that mining sector was the only industry with negative confidence levels. While some of the economic indicators improved in the recent month, the number of new orders remains soft, while capital spending remains subdued. Additionally, the upcoming spending cuts and fresh taxes, as well as "uncomfortably high" level of the Aussie are all weighing on the mood.
Another worrying sign for the economy is the first drop in employment opportunities, as jobs ads posted record first drop in 5 months. A drop indicates we can see a further decline in business confidence in the coming months.
© Dukascopy Bank SA