The Australian dollar is doing well today. The currency is up against all major peers, and is currently the strongest against the Japanese yen, the euro and the US dollar. Following strong economic data from China (the largest destination for Australian exports), commodities are rallying as traders forecast accelerating demand. Commodities that rely heavily on Chinese demand, such as copper, are up sharply as a result. Chinese data showed both fixed-asset investments and industrial output significant ahead of consensus estimates. As China's industrial economy grows ahead of expectations, demand for Australian commodities should remain high. As wrote in previous editions of the Australian dollar daily update, recent strength in the currency should prolong the medium-term bull market. Our short-term outlook remains neutral, while our medium-term outlook remains bullish.
AUD/USD is up sharply today and trading just above 0.780. EUR/AUD is down sharply and trading above 1.5680. GBP/AUD is down sharply and trading above 1.7680.
Looking at economic data relating to the Australian dollar this week, we'll see home lending and consumer confidence figures. Home loans (-1.1% vs. -0.1% expected) were below expectations. Investment lending for homes (1.1% vs. -2.6%) accelerated from previous figures, while NAB business confidence (9) met expectations. RBA Assistant Governor Bullock's speech did not address monetary policy. Westpac consumer confidence improved against previous figures (0.2% vs. -2.3% prior). RBA Assistant Governor Kent struck a hawkish tone, suggesting that good global growth may raise the outlook for inflation. He also said that there is no reason to raise rates in increments of only 25 basis points. Tomorrow, we'll see consumer inflation expectations and the monthly RBA bulletin. On Friday, we'll hear from RBA Assistant Governor Debelle. Last week, Q4 GDP growth came in below expectations.
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.