The Australian dollar is weaker against all major currencies today (except the British pound). While the currency rallied yesterday following hopes for a positive resolution to ongoing trade tensions, AUD has changed course today. According to a recent headline from Bloomberg, the US is weighing emergency laws in order to curb Chinese investment in the US. The International Emergency Economic Powers Act, enacted in 1977, allows the president to block specific transactions and seize assets in the face of a significant threat. The latest actions from the White House suggest that trade tensions are more likely to continue. China-sensitive commodities, such as copper, have also been selling off in recent weeks. Given Australia's significant trading relationship with China, the Australian dollar often serves as a proxy for the Chinese economy. The recent sell-off in the currency suggests pessimism towards China's economic prospects. Our medium-term outlook on the Australian dollar is neutral, while our short-term outlook is bearish.
AUD/USD is down today and trading just above 0.770. EUR/AUD is up slightly and trading above 1.6080. GBP/AUD is flat and trading above 1.8360.
Looking at economic data relating to the Australian dollar, this is a relatively light week. HIA new home sales (-0.7% vs. -2.1% prior) were better than previous figures. RBA Assistant Governor Kent suggested that the outlook for the Australian economy was upbeat. On Thursday, we'll see private sector credit. Last week, employment changes were worse than expected.