A snapshot note via Westpacon their Australian dollar view.
In brief:
We anticipate wider and higher ranges for AUD in the month ahead. Volatile French politics will have their sway over the global risk climate, but a resumption of more encouraging US disinflation trends and revamped Fed rate cut bets should ultimately prove more decisive.
AUD/USD remains in a choppy and challenging 0.6575-0.6715 range. Surging French political and fiscal risks are taking a toll on the global risk climate.
Still, AUD should respect supports around 0.6550/60. The case for a higher AUD/USD range continues to develop, with yield spreads potentially providing a more secure floor.
Last week’s US May CPI, PPI and jobless claims showed that disinflation trends are resuming.
Not helping the AUD, saw WPAC, are:
- commodity prices and China macro sentiment aren’t helping. Iron ore prices have fallen 15% since mid-May and port inventories are hitting two-year highs, despite efforts to ease a protracted property crisis.
China’s core growth drivers remain sluggish. May financing data showing ongoing sluggish corporate and household credit demand, while May factory output and fixed investment signal the rebound is already losing steam.
