The Australian dollar ended the day sharply lower yesterday following US Federal Reserve Chair Jerome Powell's testimony to Congress. As we wrote in our US dollar daily update earlier today, markets are bracing for a faster pace of US rate hikes following Powell's upbeat outlook on growth this year. Following his testimony, the US dollar and US Treasury yields rose, while riskier assets such as equities and commodities traded lower. As a commodity currency, the Australian dollar fell alongside riskier assets. Turning to data, recent data from China is also weighing on the currency. Both manufacturing and non-manufacturing PMIs were significantly below consensus estimates. Looking at domestic data, private sector credit was slightly below estimates. As we wrote in a longer commentary published yesterday, the Australian dollar is running out of momentum. Our short-term outlook on the currency remains neutral, while our medium-term outlook is bullish.
AUD/USD is up today and trading just above 0.780. EUR/AUD is down and trading above 1.5640. GBP/AUD is down and trading above 1.7790.
This is a fairly light week for economic data relating to the Australian dollar. YoY private sector credit (4.9% vs. 5% expected) was slightly below estimates. Tomorrow, we’ll get AiG performance of manufacturing numbers, private capex and the RBA’s commodity index figures for February. On Friday, we'll get HIA new home sales. Last week, the wage price index was slightly ahead of consensus estimates.