The Australian dollar is higher against all major currencies today. The Aussie is currently making the biggest gains versus the US dollar and the British pound. Yesterday, the currency fell sharply against the US dollar, but traded sideways against the euro and the Japanese yen. Thanks to both rising inflation and high growth in the US, rate hike expectations are powering the US dollar higher. In Australia, the RBA continues to remain in neutral, and expectations for higher interest rates are much more limited as a result.
Looking at today's wage figures, quarter-over-quarter figures in Q1 were slightly below expectations (0.5% vs. 0.6% expected). As accelerating wages are watched closely by central bank economists, weak wage growth typically weighs on rate hike expectations. In Australia's case, the figures had a limited impact on the currency as rate hike expectations are already very weak.
Once again, the Australian dollar is primarily trading as a function of international developments today. Thanks to a falling US dollar, commodities including copper and industrial metals are moving higher. Chinese equity markets, such as Hong Kong's Hang Seng Index are also moving up. As a result, the Australian dollar is enjoying a rebound. Our short-term outlook and medium-term outlook on the Australian dollar remains bearish.
AUD/USD is up and trading just above 0.7490. EUR/AUD is down and trading above 1.5810. GBP/AUD is down and trading above 1.8020.
In this week’s Australian dollar economic calendar, we’ll see employment data. RBA Assistant Governor Debelle did not address the Australian dollar in his speech, while the RBA’s latest meeting minutes suggested a continuation of the status quo. The YoY Q1 wage price index (2.1%) met expectations, although quarterly figures were lower than expectations. Tomorrow, we’ll see employment changes for April and the associated unemployment rate. Last week, March retail sales missed expectations by a wide margin.