The Australian dollar is higher against all major currencies today. AUD is currently the strongest against the Japanese yen and the US dollar. Yesterday, the currency strengthened after Trump signaled his hopes for a deal with China. Today, the currency is strengthening after Chinese President Xi outlined plans to significantly open up the Chinese economy.
As we wrote in our US dollar daily update, China's Xi has promised to lower auto tariffs, decrease tariffs on other products, and improve the protection of intellectual property for foreign businesses operating in China. Xi recently spoke at the Boao Forum in Hainan, China. Following his speech, traders bought riskier assets (such as equities and the Australian dollar) on hopes that China and US will avoid a trade war. The move up in the Australian dollar has been especially pronounced given the country's significant trading relationship with China. Given restrictions on trading the Chinese yuan, the Australian dollar often serves as a proxy for China's economic prospects. Given the significant move up in the currency, we expect to upgrade our short-term outlook on AUD to neutral over the coming days. Our medium-term outlook on the Australian dollar remains bearish.
AUD/USD is up today and trading just above 0.7730. EUR/AUD is down and trading above 1.5970. GBP/AUD is down slightly and trading above 1.8310.
Looking at economic data from Australia this week, we'll see sentiment data and housing investment numbers. The AiG performance of construction index accelerated from previous figures (57.2 vs. 56 previously). NAB business confidence for March (7 vs 12 expected) was significantly below estimates. Tomorrow, we'll see Westpac consumer confidence and hear a speech from RBA Governor Philip Lowe. On Thursday, we'll see consumer inflation expectations for April, February investment lending for homes and February home loans. Last week, the RBA kept rates on hold.
As the Australian dollar weakens, we are downgrading the currency to bearish. 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 runs out of steam, 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.