The Australian Dollar struggled to get much traction on Tuesday and on a day when the US Dollar performed quite poorly, AUD/USD ended pretty much where it had begun in Sydney around the mid-0.78’s. The AUD/NZD cross was again quite lively but in the opposite direction to Monday; falling more than half a cent from a best level just under 1.0840 to the 1.0770 area and has slipped a little further today. Overnight in Asia and Europe, the rally in US stock index futures has helped AUD/USD extend gains into the high 0.78’s but there has been little enthusiasm to chase it much further ahead of the US inflation numbers later this morning.
After Tuesday’s NAB business survey, today we’ve seen the Westpac survey on consumer confidence fell by 2.3% to 102.7 in February from 105.1 in January. The bank notes, “The survey was conducted over the week of February 5 – February 11. That week was marked by a wave of volatility in global share markets. The Australian market, which was more stable than most, still experienced some significant swings, being down a net 4.6% for the week while the US market (S&P 500) was down by a net 7.2%... Extensive media coverage of these developments would have unnerved respondents on two fronts – the impact on their own financial position and concerns for general global stability. These concerns appear to have been acutely felt by retirees whose confidence fell by 13.5%”. Looking at the details, Westpac point out, ““Developments in the components of the Index are consistent with the likely impact from last week’s market volatility. In particular respondents’ assessments of their own finances suffered, the ‘finances vs a year ago’ sub-index fell by 4.5%; and the ‘finances, next 12 months’ sub-index fell by 3.1%. We assume that these components have suffered temporary set- backs associated with market volatility. On face value the ‘year ago’ component is sending a very weak signal about likely spending prospects.”
We noted earlier in the week that Commonwealth Bank of Australia have changed their interest rate forecasts to remove the two hikes they previously had penciled-in for 2018. Westpac haven’t yet done this but note, “While we are less optimistic about the unemployment rate and the growth outlook, the Bank’s forecasts are not entirely out of line with our own view and, arguably, consistent with steady rates over the next few years.” NAB, meantime, still has two 25bp hikes in its forecast profile for H2 2018. The Australian Dollar starts in North America this morning at USD0.7865, with AUD/NZD at 1.0755 and AUD/CAD0.9890.