After a sharp fall, the Australian dollar is flat this morning. Yesterday, Australian consumer sentiment and wage growth figures missed estimates. Economic data from China was also disappointing. Looking at today's numbers, while unemployment was better than expected, the participation rate and changes in employment was lower than expected. All in all, recent data points to significant weakness for Australian consumers and suggests a lower outlook for growth. Our outlook on the currency remains negative, with the caveat that the Australian dollar is starting to look oversold in the short-term.
AUD/USD is currently trading just above 0.7590. Looking at EUR/AUD, the pair is currently just above 1.5510. 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). Employment changes (3.7k vs. 17.5k expected) and the participation rate (65.1% vs. 65.2% expected) both missed expectations. On the positive side, unemployment was better than expected (5.4% vs. 5.5% expected). 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.