Despite a strong correlation between US stocks and the AUD/USD exchange rate throughout Monday, the relationship completely broke down yesterday. The high around 0.7755 came at lunchtime in Sydney and from that point onwards it was steadily lower for the pair, even as the futures market signaled an initial triple-digit gain for the Dow Jones Industrial Average before a late plunge into the close. The Aussie Dollar fell on every one of its crosses and was the worst performer of all the major currencies we follow here. AUD/NZD is back on a 1.05 handle whilst AUD/CAD fell on to a 98 cents handle for the first time in almost six weeks. This morning in Europe, AUD/USD fell below 0.7660 for the first time since December 20th.
The weekly consumer confidence numbers were no help to the AUD with the headline index slipping 0.9% last week following a 2.2% bounce previously. Views towards current economic conditions deteriorated sharply by 6.8% to 101.9, its lowest value in 18 weeks. Future economic conditions were also hit, falling 3.6% to 108.7, a five-week low. The team at ANZ who produce the data noted, “Last week’s back-and-forth on import tariffs between the US and China roiled global and domestic equity markets, fuelling fears of retaliatory measures by governments worldwide. This is likely responsible for the sharp deterioration in households’ views around the economic outlook. Additionally, the unexpected tick up in the unemployment and underemployment rate in February may also have impacted. Stepping away from the week-to-week volatility, views around economic conditions (four-week average) have fallen by about a third from their February peak. However, they remain above their long-term average and consistent with our expectations of solid economic growth in 2018.”
As the end of the month and quarter approaches, there are only a couple more bits of economic data due for release Down Under: the housing credit and job vacancy numbers on Thursday. So far this week, the AUD has been the worst performer of the major currencies we follow here and it’s hard to see the local data coming to its rescue before the close of business tomorrow. The Australian Dollar opens in North America this morning at USD0.7770, with AUD/NZD at 1.0575 and AUD/CAD0.9885.