After weakening in late 2016, following Trump's victory, AUD/CAD strengthened back to around 1.00 in March 2017. Since then, the pair has weakened as the Canadian dollar has done well thanks to strong economic growth and interest rate hikes. As both countries are highly dependent on natural resource exports, the Aussie dollar and the loonie tend to rise and fall together. Thus volatility in this pair is usually fairly low.
The Australian dollar is currently mixed. The Aussie is flat against the US dollar, while strengthening against the Japanese yen, euro and the British pound. Yesterday, the currency strengthened against the US dollar at the outset of the day, but ended the day lower. Today's AUD/USD trading range is 0.7350 - 0.7510. The pair is currently trading just above the low end of our indicated trading range.
Chinese equity markets have resumed selling off after yesterday's rebound. Both the Shanghai Composite and Hong Kong's Hang Seng Index are currently weaker. The Chinese offshore yuan (CNH) is also down sharply, with USD/CNH currently trading above 6.50. Given Australia's significant trading relationship with China, the currency tends to closely track developments in Chinese financial markets. Thanks to an ongoing deceleration in growth across emerging markets, the Australian dollar remains under pressure.
Looking at developments from Australia, RBA Governor Philip Lowe said that global inflation may be set to remain low for extended periods of time. Lowe also highlighted the unknown risks associated with prolonged quantitative easing. Recent communications from the RBA suggest that the Bank remains firmly in neutral.
In politics, Prime Minister Turnbull has claimed a major victory after passing income tax cuts through Australia's Senate. The news had a limited impact on the currency as the Australian dollar remains weighed down by concerns regarding the future outlook. Our outlook on the Australian dollar remains bearish.
AUD/USD is down slightly and trading just above 0.7350. EUR/AUD is down and trading above 1.5680. GBP/AUD is down slightly and trading above 1.7830. AUD/JPY is up slightly, and trading above 81.20.
|June 19||House Price Index YoY Q1||2%||5.0%|
|June 19||RBA Meeting Minutes|
|June 20||RBA Gov Lowe Speech|
|June 21||Westpac Leading Index MoM MAY||0.2%|
|June 21||RBA Bulletin|
The Canadian dollar is mixed today. The loonie is currently selling off against the US dollar, while strengthening against the euro and the British pound. Yesterday, the Canadian dollar continued to weaken against the US dollar, and is currently trading near 12-month lows. Today's USD/CAD trading range is 1.3070 - 1.3330.
As the outlook for Canada darkens, the odds of a Bank of Canada rate hike are falling. This can be seen in falling bond yields for short-term Canadian government bonds. While 2-year US Treasury bond yields continue to rise (and are currently yielding 2.56%), equivalent bond yields in Canada are falling and are currently yielding just 1.85%. Beyond the differential in bond yields (0.71%), yields are also moving in the opposite direction. This is a particularly bearish sign, and suggests that the Canadian dollar is likely to keep weakening.
Beyond bearish signals from the bond market, the Canadian dollar remains under pressure thanks to decelerating growth, ongoing trade tensions and weakness in crude oil prices. More recently, the Canadian real estate market is also showing signs of jitters, with sales volumes falling to a nine year low according to recent figures from the Canadian Real Estate Association. With plenty of reasons for the currency to keep weakening, our outlook on the loonie remains bearish. Note that there are no major updates relating to NAFTA today.
The USD/CAD exchange rate is currently above 1.3320. The euro is down against the Canadian dollar, with EUR/CAD currently above 1.5350. The pound is down slightly against the Canadian dollar, with GBP/CAD trading above 1.7460. CAD/JPY is flat, and currently trading above 82.80.
|June 21||ADP Employment Change MAY||30.2K|
|June 21||Wholesale Sales MoM APR||1.1%|
|June 22||Inflation Rate YoY MAY||2.2%|
|June 22||Core Inflation Rate YoY MAY||1.5%|
|June 22||Retail Sales YoY APR||4.1%|
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