GS comments on the Australian dollar, the bank have three reasons to be constructive on the currency:
Australia's activity data have generally been on the disappointing side in recent weeks
- especially the collapse in the NAB Business Survey
- and accelerating declines in house prices
As a result, despite some tentative evidence of firming inflation pressures, our economists flag that the RBA could drop its hiking bias in the minutes to (Tuesday's) meeting
However, FX price action … is again a useful reminder that domestic activity is just one small part of what drives AUD, and we see three reasons to be constructive:
- Higher iron ore prices will support the terms of trade
- China-related risks seem to be moving in a more constructive direction
- We think the Fed's "patient" policy stance should support
