A slight advance in AUD/USD this week to $0.705 is hardly cause for celebration; however, the stability this represents following 3 weeks of losses would normally signify reduced currency pessimism—in this case, it doesn’t even do that.
The gains made this week by the benchmark Australian dollar rate, AUD/USD, fail to give a true impression of the currency’s performance which, as in the bulk of the past 3 weeks, has been below par.
At 4pm in London on Thursday, against six of the other nine G10 currencies, the Australian dollar was quoted lower than its level a week ago; against one of the G10, it was unchanged; against only two currencies, including the US dollar, it was higher.
A couple of economic data releases have assisted the Aussie on its way down. First, National Australia Bank’s widely followed measure of Australian business confidence, released on Tuesday, fell to its lowest level since 2015, and then, the Westpac-Melbourne Institute’s index of consumer sentiment dropped into “pessimism” territory for the first time since 2017.
Westpac itself was the cause of heavy Australian dollar selling on February 20th when it slashed Australian growth forecasts and, more importantly, predicted 50 basis points worth of interest rate cuts by the RBA this year, way more than priced in at the time.
Westpac now agrees with JP Morgan and HSBC that the Australian dollar will end the year worth less than it is now. The first two banks foresee US$0.68 at year-end but the latter is more downbeat; it argues for US$0.66.
One notable exchange rate, AUD/NZD, has at least thoroughly rejected a move below what Nordea analysts described on Monday as the “make or break” level of NZ$1.033, signalling higher prices in the short term. The rate was back trading at NZ$1.035 on Thursday, having risen steadily since Wednesday’s failed attempt on NZ$1.3.
Another Aussie exchange rate worth mentioning is AUD/GBP, which has struck its lowest level since June 2016, at £0.53. Of late, the Australian dollar has been unable to compete with the pound, not with the latter benefiting every time the British government fails to make a decision on how to deliver Brexit, which is a near-daily occurrence.