The Australian dollar suffered another sharp fall yesterday after the stock market rout returned. Looking at the S&P 500, the index ended the day down 3.75%. Today, Asian stock markets were mostly lower with the sharpest sell-offs occurring in China. As we explained in previous editions of the Australian dollar daily update, the currency tends to weaken during global downturns. While stock markets remain weak today, the Australian dollar is mostly flat. Looking at AUD/USD, the exchange rate appears to have stabilized around 0.77 so far. Turning to data, home loans and investment lending for homes were both lower than estimates. As we wrote in a recent commentary, domestic data has been decidedly weak in recent history. Our short-term outlook on the currency is neutral, while our medium-term outlook remains bullish.
AUD/USD is flat and trading just above 0.7770. EUR/AUD is flat and trading above 1.5780. GBP/AUD is flat and trading above 1.7940.
Looking at economic data this week, markets will be watching retail sales and an upcoming RBA rate decision. The AIG services index was ahead of the previous figures (54.9 vs. 52 previous). MoM retail sales (-0.5%) and the trade balance ($-1,358m) were both significantly below estimates. The RBA kept rates on hold, while suggesting that inflation was set to remain weak. The Bank did state, however, that employment was likely to improve. The AiG construction index accelerated from previous figures (54.3 vs. 52.8 prior). Home loans (-2.3% vs 1.1% expected) missed expectations. Last week, headline and trimmed mean inflation was slightly below expectations.