The Australian dollar fell yesterday and continues to sell off this morning. Lower-than-expected GDP growth figures continues to weigh on the currency, and the Aussie is particularly weak against the US dollar and the euro. In other recent news, exports were much lower than estimates, raising doubts regarding the health of China's economy. As inflation remains below the Reserve Bank of Australia's target and growth falls short of expectations, rate hike expectations are falling as a result. As the RBA remains on hold, the Australian dollar is becoming less attractive in relative terms as other central banks (the US Federal Reserve in particular) continue hiking interest rates. Our short-term and medium-term outlook remain bearish.
AUD/USD is currently down and trading just above 0.7520. Looking at EUR/AUD, the pair is up and currently just above 1.5670. The GBP/AUD exchange rate is up and currently above 1.7770.
This is a significant week for economic data relating to the Australian dollar. TD Securities inflation was higher than the previous print (2.7% vs. 2.6% prior). The RBA left cash rates on hold but omitted references to "inflation is likely to remain low for some time". Retail sales beat expectations (0.5% vs. 0.3% expected). Q3 GDP growth figures were below expectations (2.8% vs. 3% expected). AiG Performance of Construction Index (57.5 vs. 53.2 prior) was stronger than the previous print while trade figures widely missed expectations (A$105m vs. A$1.37b expected). Lastly on Friday we’ll get home loans and investment lending for homes.
As the Australian dollar continues to sell off following China's 19th Party Congress, we are downgrading the currency to bearish. Looking at a daily chart of the Aussie, the currency is trading within normal conditions. This is based on various technical indicators.
As the currency weakens on lower rate hike expectations and slow growth, we are now bearish on the Australian dollar in the medium-term. Looking at a weekly chart, the Aussie is trading within normal conditions. Our analysis is based on various technical indicators.