The Australian dollar is lower against all major currencies today. AUD is currently the weakest against the US dollar and the euro. Yesterday, the currency was also weaker thanks to a stronger US dollar and lower commodity prices. While the Aussie did well at the outset of the day, the currency weakened during European and US trading hours.
Given Australia's significant trading relationship with China, the currency remains highly sensitive to developments in Chinese financial markets. Looking more closely at Chinese equities, Hong Kong's Hang Seng Index and the Shanghai Composite are both selling off sharply today. While the Hong Kong dollar is no longer trading at the weakest end of its peg (7.85), rising Hong Kong interest rates (i.e. HIBOR) are a risk for Hong Kong property prices. While Australian interest rates are also rising today (10-year government bonds are currently yielding 2.818%), the currency is not strengthening as most global rates are also rising. Our short-term outlook on the Australian dollar is neutral, while our medium-term outlook remains bearish.
AUD/USD is down and trading just above 0.770. EUR/AUD is up slightly and trading above 1.5990. GBP/AUD is flat and trading above 1.8230.
Looking at economic data relating to the Australian dollar this week, important data releases include changes in employment for March. The RBA’s meeting minutes suggested that monetary policy remains in neutral. The Westpac leading index for March (-0.2% vs. 0.4% prior) was lower than previous figures. NAB business confidence for Q1 2018 (7 vs. 6 previously) accelerated from prior figures. Changes in employment (4.9k vs. 21k expected) were below consensus estimates. Last week, RBA Governor Philip Lowe suggested that monetary policy is likely to remain in neutral.