The Australian dollar is mostly lower today. AUD is currently the weakest against the Japanese yen, the euro and the US dollar. The currency fell sharply yesterday following news that Trump is seeking to reduce the Chinese trade deficit by $100b per year. Today, there is no rebound in sight as the currency continues to weaken. Looking at the Dow Jones Commodity Index (a broad measure of commodity prices), the index is flat today. While the Australian dollar is typically strongly correlated to commodity prices, the currency is not being helped by flat commodity prices today.
Turning to domestic events, RBA Deputy Governor delivered a speech regarding global bond markets. Specifically, he offered various theories for why investors were prepared to accept low interest rates. He also commented that Australia's financial system may be relatively resilient to financial shocks, as the country's banking system had issued longer-term debt. His comments had a limited reaction on the exchange rate. Our short-term outlook remains neutral, while our medium-term outlook remains bullish.
AUD/USD is down slightly today and trading just above 0.7780. EUR/AUD is up and trading above 1.580. GBP/AUD is up and trading above 1.7910.
Looking at economic data relating to the Australian dollar this week, we'll see home lending and consumer confidence figures. Home loans (-1.1% vs. -0.1% expected) were below expectations. Investment lending for homes (1.1% vs. -2.6%) accelerated from previous figures, while NAB business confidence (9) met expectations. RBA Assistant Governor Bullock's speech did not address monetary policy. Westpac consumer confidence improved against previous figures (0.2% vs. -2.3% prior). RBA Assistant Governor Kent struck a hawkish tone, suggesting that good global growth may raise the outlook for inflation. He also said that there is no reason to raise rates in increments of only 25 basis points. Consumer inflation expectations (3.7%) were slightly higher than previous figures. RBA Deputy Governor Debelle delivered a speech regarding global bond markets. Last week, Q4 GDP growth came in below expectations.