The Australian dollar has experienced a fairly wild day today. While the currency began the day on a much weaker note, the currency is strengthening sharply (particularly against the US dollar). The Australian dollar is mostly flat against other major currencies such as the euro and the British pound. As a high-beta currency, AUD is particularly sensitive to global risk sentiment. While US inflation figures were ahead of estimates (stoking fears of faster rate hikes), risk appetite is improving and this is helping the Australian dollar. Looking at inflation figures in more detail, month-over-month core inflation was fairly low. This helped markets brush off the higher-than-expected figure for year-over-year headline inflation. Tomorrow, markets will be closely watching Australian jobs figures. The Reserve Bank of Australia expects jobs and wages to improve this year, and jobs numbers are thus relevant for rate hike expectations. Our short-term outlook on the currency is neutral, while our medium-term outlook remains bullish.
AUD/USD is up and trading just above 0.7910. EUR/AUD is flat and trading above 1.5710. GBP/AUD is flat and trading above 1.760.
Looking at economic data from Australia this week, traders will be watching employment figures. NAB business confidence (12 vs. 11 prior) was ahead of previous numbers. Westpac consumer sentiment (-2.3% vs. 1.8% prior) was below previous figures. Tomorrow is the most important day, and we'll see employment changes, the unemployment rate and consumer inflation expectations. On Friday, RBA Governor Philip Lowe will deliver a speech. Last week, the trade balance was significantly below estimates thanks to higher-than-expected imports.
As the Australian dollar runs out of steam, we are downgrading the currency to neutral. Looking at a daily chart of the Aussie, the currency is trading within a normal range. This is based on various technical indicators.
As the Australian dollar rebounds, we are now bullish 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.