The Australian dollar continued its strong rebound in Asian and early European trade rising above the 1.0350 level in the wake of much better than expected consumer sentiment data. The Westpac consumer sentiment survey jumped by 7.7% from 0.6% the month prior showing a marked improvement.
The reading in February rose to 108.3 from from 100.6 in January. This was the highest rise in more than two years driven by continued low interest rates and improving conditions in real estate and equity markets. The strong jump in consumer sentiment is a welcome sign for the RBA which has been faced with a slew of recent economic data that suggests that growth Down Under is beginning to slow.
The sharp increase in consumer sentiment however is an indication that the central bank’s accommodative monetary policy may be starting to have a positive impact and could translate into better aggregate demand as the year proceeds.
The Aussie rose to a high of 1.0360 after marking a fresh yearly low of 1.0225 in yesterday’s trade. The recovery in the unit is likely to face stiffer resistance around the the key 1.0400 level, but for now it appears that a short covering rally may have more legs.