The Australian dollar is back above 94 US cents, getting a boost from improved Chinese industrial profits.
Early Tuesday, the local unit was trading at 94.07 US cents, up from 93.89 cents on Monday.
Chinese industrial profits grew by 17.9 per cent in the year to June, and up 11.4 per cent in the six months to June.
BK Asset Management managing director Kathy Lien said the figures confirm that the Chinese economy is recovering from its slump earlier in the year.
“Stronger profitability bodes well for countries like Australia,” she said.
“The prospect of a stronger Chinese manufacturing PMI (purchasing managers’ index) should keep the Australian dollar bid this week.”
The main economic event this week will be the outcome of the US Federal Reserve policy meeting which ends early on Thursday morning, Australian time.
Ms Lien said the Fed was widely expected to taper its bond purchases by another $US10 billion a month.
“The only tweak the Fed could make is to their description of unemployment,” she said.
“Since the June meeting, the unemployment rate declined from 6.3 per cent to 6.1 per cent, challenging the Fed’s view that unemployment continues to be high.”
In other data released today, consumers appear to have got their groove back, with confidence levels rebounding to where they were before people started worrying about government budget cuts.
The latest weekly ANZ-Roy Morgan survey shows consumer confidence levels have completely recovered from the sharp drop that began in April as stories emerged about federal budget cuts.
Consumer confidence levels have risen 2.4 per cent in the past week, suggesting the falls in April and May were only temporary and related to “sticker shock” from the budget.
ANZ chief economist Warren Hogan said consumer confidence levels were now back in line with business confidence.
“Consumer confidence is now back to pre-budget levels and consistent with moderate growth in consumption and economic activity,” he said in a statement on Tuesday.
“The good news is that the headline impact of the budget appears to be temporary and the more enduring features of the economy, such as rising share and house prices, job creation and a stable world economy are now driving consumer attitudes to spending and finances.”
Mr Hogan said that now consumers were feeling more confident, retail sales should pick up.
ANZ expects consumer spending to remain moderate in 2014, with improvements to flow through into 2015.
