The Australian dollar is weakening today, after selling off yesterday. AUD is currently lower against all major peers, and is the weakest against the US dollar. While wage growth figures announced earlier today beat consensus expectations, the currency has been unable to overcome weakness in commodity markets. Over longer periods of time, the Australian dollar is strongly correlated with the RBA's Index of Commodity Prices. The index is a trade-weighted measure of Australian commodity exports, and includes relatively higher weights for bulk commodities such as iron ore, coal and LNG. China is the largest buyer of Australian commodities, and this explains why the currency is also strongly correlated to Chinese economic conditions. Looking at a chart of commodity prices, most commodities have been falling for the past two days. Our short-term outlook on the currency remains neutral, while our medium-term outlook is bullish.
AUD/USD is down today and trading just above 0.7850. EUR/AUD is up and trading above 1.5680. GBP/AUD is up and trading above 1.770.
This is a fairly light week for economic data relating to the Australian dollar. The RBA’s meeting minutes suggested that the Bank remains on hold. RBA Assistant Governor Bullock stated that mortgage stress in Australia remains low. The wage price index (2.1% vs. 2% YoY expected) beat consensus estimates. Tomorrow, we’ll see new motor vehicle sales. Last week, Australian jobs were slightly ahead of expectations. However, the number of full-time jobs fell.
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.