The Australian dollar was fairly weak yesterday but is rebounding this morning. Commodity currencies were broadly weaker yesterday as the euro gained thanks to sharply higher German bond yields. While Australian bond yields also rose yesterday, German yields were relatively higher. Looking at the Dow Jones Commodity Index, the index has been falling after peaking in early November. Given the Australian dollar's sensitivity to industrial commodities, the currency tends to suffer when commodity prices fall. Our medium-term outlook on the Australian dollar remains bearish.
AUD/USD is currently up slightly and trading just above 0.7660. Looking at EUR/AUD, the pair is flat and currently just above 1.5440. The GBP/AUD exchange rate is flat and currently above 1.7460.
This is a very light week for economic data and events relating to the Australian dollar. The government’s mid-year economic and fiscal outlook projected a shrinking budget deficit. The RBA’s meeting minutes highlighted confidence regarding the future while noting weakness in consumer spending. Last week, employment changes beat expectations by a wide margin.