This snippet via Mizuho on the Australian dollar. In a (very) brief summary of the piece:
China Woes:
- The sheer magnitude of balance sheet and cash-flow shocks mean stimulus, including rate cuts are mere signals not solutions.
- Especially as further property sector and wealth management product risks threaten with fresh balance sheet and cash-flow shocks.
- fresh assaults on CNY stability pose an overarching policy challenge and dilemma; given sharp stimulus and stability trade-offs.
And thus to the AUD:
- only just averting a slip back below 0.64 and hardly showing any signs of traction.
- One reason for this is that clarity on Chinese measures to revive a construction boom continue to elude.
- And even for optimists, it appears that it will take a while to get the economy back on its feet. - In which case, commodity channel drag forces on AUD are not materially reversed into a boom.
- What's more, perceptions of a more dovish RBA also stand in stark contrast to continued G10 tightening elsewhere.
- For now AUD could remain under the weather in the mid-0.63 to 0.65 range.
