AUD: The week ahead - ANZ

Research Team at ANZ, suggests that as an AUD bear, there is little more one could have asked for in the past week in terms of news flow.

Key Quotes

“The RBA eased rates and released a relatively dovish Statement of Monetary Policy, data from retail sales to business and consumer confidence deteriorated, while on the other side of the world the US payrolls number was a blockbuster, substantially beating consensus. Yet here we are, with the AUD having made a solid technical break higher and pushing towards the 2016 high.

If we take the above week as the hurdle rate for what is needed to push the AUD lower, then the week to come is unlikely to be able to provide any joy either. In particular, what is becoming obvious is that the threshold for the AUD to re-test lows has risen significantly, and the propensity for markets to move alongside fundamentals has diminished, at least in the near term.

As such, while we are watching the RBA Minutes and the Australian employment numbers closely, neither are likely to be able to drive significant losses for the AUD, even if they point to further weakening in the economy, or further rate cuts ahead.

The key release for the week will be the US FOMC Minutes. It will provide context around the last meeting, where the Fed was a touch more hawkish than anticipated. Some parallel can be drawn to the April meeting, where the Fed sounded more hawkish, but it was only once the minutes were released and the details of the board’s discussion was revealed that we saw any real reaction in the pricing of the Fed and in the USD.”