The Australian dollar is lower against all major currencies except the Japanese yen and the Canadian dollar today. AUD is currently the weakest against the US dollar and the British pound. Last week, the currency sold off sharply (particularly towards the end of the week) as the US dollar staged a rebound alongside rising US bond yields.
Today, the Australian dollar continues to sell off. While Australian bond yields are surging in anticipation of accelerating inflation (10-year Australian government bonds are currently yielding 2.876%, up from 2.60% at end of March), this is having a limited impact on the currency. Instead, AUD is weakening in response to US dollar strength. Looking at Chinese financial markets, the Chinese yuan is also selling off against the US dollar (USD/CNH is trading just under 6.30). Given Australia's close trading relationship with China, the Aussie tends to track China-sensitive financial assets such as the Chinese yuan and industrial metals. Our short-term outlook on the Australian dollar is neutral, while our medium-term outlook remains bearish.
AUD/USD is down and trading just above 0.7650. EUR/AUD is up slightly and trading above 1.60. GBP/AUD is up and trading above 1.8290.
Turning to economic data and events from Australia this week, traders will be watching upcoming inflation figures. Tomorrow, we’ll hear a speech from RBA Assistant Governor Kent. We’ll also see the Q1 consumer price index and the RBA’s trimmed mean CPI. On Thursday, we’ll see the export and import price index for Q1. On Friday, we’ll see producer prices for Q1. Last week, changes in employment missed expectations.
As the Australian dollar trades sideways, we are now neutral on the currency. Looking at a daily chart of the Aussie, the currency is trading within a normal range. This is based on various technical indicators.
As the Australian dollar runs out of steam, we are now bearish on the Australian dollar in the medium-term. Looking at a weekly chart, the Aussie is trading within normal conditions. Our analysis is based on various technical indicators.