MUFG has indicated that the Australian Dollar (AUD) is one of the weakest performers among the G10 currencies. This comes in response to the release of weaker than expected activity data from China for April, which has resulted in AUD/USD falling below the 0.6700-level and AUD/NZD nearing the 1.0700-level.

The bank highlights that despite an 18.4% annual increase in retail sales, broader economic activity in China appears to be lagging. This is evident in the disappointing recovery of fixed asset investment and industrial production. Particularly concerning is the deeper contraction in property investment, which declined by an annual rate of -7.2%.

These disappointing numbers suggest that China's housing market might require additional support from policymakers to stabilize the sector and stimulate a stronger, broader economic recovery. MUFG argues that this loss of upward momentum in China's domestic economic recovery at the start of Q2 will likely put more pressure on policymakers to announce further stimulus/support measures.

Interestingly, the bank points out that the economic recovery seems weaker in sectors that are more significant for commodity demand, which has yet to rebound as expected due to increased demand from China. This fact, coupled with recent declines in commodity prices, is impacting the outlook for commodity-related currencies such as AUD.