AUD Daily Updates

05 March 2018

The Australian dollar is once again lower today. The currency has been fairly weak in recent history, as global risk appetite falls. Last week, AUD fell as global equity and commodity markets weakened while safe havens (such as the yen) strengthened. This week, risk sentiment remains challenged. Thanks to President Trump's intention to establish tariffs on steel and aluminum imports and rising political risks from the Eurozone, riskier assets continue to sell off. Given the Australian dollar's strong correlation to commodity prices, the currency is weakening as a result. Looking at domestic economic data, building permits surged higher (12% year-over-year) while TD Securities inflation for February also accelerated from the previous print. Despite strong growth-related and inflation data, the currency remains weak. Our short-term outlook on the currency remains neutral, while our medium-term outlook is bullish. As momentum wanes, we expect to downgrade our outlook over the coming days.    

AUD/USD is down today and trading just above 0.7740. EUR/AUD is up sharply and trading above 1.5910. GBP/AUD is up slightly and trading above 1.7810.

Looking at economic data relating to the Australian dollar, we'll see Q4 GDP and hear from the RBA. YoY TD Securities inflation accelerated this month (2.1% vs. 2% prior), while MoM building permits were significantly ahead of forecasts (17.1% vs. 4% expected). Tomorrow, we'll see retail sales. More importantly, an RBA meeting is scheduled for tomorrow and we'll hear Governor Philip Lowe deliver his rate statement. No changes to interest rates are expected. On Wednesday, we'll see Q4 GDP growth and the AiG performance of construction index. On Thursday, we'll see trade balances. Last week, private capex and the RBA's commodity index were below estimates. 

Short term outlook

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.  

Medium term outlook

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.