The Australian dollar remains very weak, and has fallen sharply against the euro and the US dollar in the past few days. Earlier today, consumer sentiment and wage growth figures were poor. Consumer sentiment registered at -1.7% (vs. 3.6% prior) while wage growth missed expectations (2% vs. 2.2% expected). Given the RBA's focus on wages, any hopes for future interest rate hikes looks premature today. The currency has also come under pressure from Chinese data. Yesterday, Chinese urban investment, retail sales and industrial production all missed estimates. Given Australia's reliance on Chinese exports, the currency is highly sensitive to news from the country. Our outlook on the Australian dollar remains bearish for both the short-term and medium-term time frames.
AUD/USD is currently trading just above 0.7580. Looking at EUR/AUD, the pair is currently just above 1.5580. The GBP/AUD exchange rate is currently above 1.7370.
This week’s economic data contains consumer confidence, employment and consumer inflation expectations. NAB business conditions were stronger than the last print (21 vs. 14 prior) as were confidence figures (8 vs. 7 prior). Westpac Consumer Confidence numbers were weak (-1.7%) while wage growth missed expectations (2% vs. 2.2% expected). Later on Thursday, we’ll get employment changes and the unemployment rate. Last week, the RBA maintained its cash rate (1.5%) while suggesting a weak outlook for inflation.
After weakening sharply in the latter half of October, we are downgrading the Australian dollar further to bearish. The currency is weak thanks to lower-than-expected inflation rates and falling Australian bond yields. Looking at a weekly chart, the Aussie has re-entered normal trading conditions having been overbought for most of September. Our analysis is based on various technical indicators.