After falling in the early part of the day, the Australian dollar reversed course yesterday and ended the day higher. This morning, the currency continues to make gains and is especially strong against safe havens including the US dollar and the Japanese yen. The Australian dollar remains strong thanks to optimism for global growth and higher commodity prices. Copper, a key Australian export, is currently trading at the best levels since late-2014. Looking at Chinese financial markets, the yuan remains strong with USD/CNH trading below 6.50. Chinese equities are also at record levels thanks to optimism for growth. Hong Kong's Hang Seng index is currently at the highest level since 2007. Meanwhile, the Shanghai Composite has also started the year with a bang. Given the size of Australia's export relationship with China, the currency tends to track the fortunes of Chinese financial markets. Despite recent strength, our medium-term outlook remains bearish.
AUD/USD is currently up and trading just above 0.7840. EUR/AUD is currently flat and trading above 1.5320. GBP/AUD is flat and trading above 1.7230.
This is a very light week for economic data relating to the Australian dollar. The AiG services index was higher than the previous print (52 vs. 51.7 prior). Tomorrow, we'll see exports, imports and the overall trade balance. Prior to the holidays, the RBA's minutes suggested a positive economic outlook, while noting weakness in consumer spending.