The Australian dollar is up against all major currencies today. The Aussie is the strongest against the US dollar and the Japanese yen. Yesterday, the currency also performed well, and was particularly strong against the US dollar. For the past week, we have stated that the US dollar was looking overbought, meaning AUD/USD was due for some relief. After yesterday's big move, the US dollar is no longer looking overbought.
Turning to recent developments, both home loans and investment lending for homes were significantly below estimates. While the data had a limited short-term impact on the currency, domestic data from Australia remains disappointing. Unfortunately, the longer-term outlook for the Aussie remains bearish as emerging market growth decelerates this year. As we contended in a longer commentary on AUD, a significant slowdown in Chinese growth (and the impact from falling commodity prices), means that a longer term downturn lies in store for the Australian dollar. For now, the Aussie is enjoying some well-deserved relief following a significant sell-off that began in late April. Our short-term outlook and medium-term outlook on the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7550. EUR/AUD is down and trading above 1.5790. GBP/AUD is down slightly and trading above 1.7930.
This is a relatively light week for the Australian dollar economic calendar. The AiG performance of construction index for April (55.4 vs. 57.2 prior) decelerated from previous figures. MoM retail sales for March (0% vs. 0.3% expected) were below expectations. The annual budget release had a limited impact on the currency. March home loans (-2.2% vs. -1.9% expected) and investment lending for homes (-9% vs. 0.5% prior) were both disappointing. Last week, the Reserve Bank of Australia upgraded its outlook for growth and inflation over the coming two years.