From Commonwealth Bank of Australia on what to watch for AUD this week ahead

  • AUD/USD is likely to be guided by offshore developments this week given the lack of local Australian economic data.
  • Australian May private sector credit on Friday is the economic data highlight
  • Globally the world economy looks in reasonable shape. The global economic expansion is becoming more broad-based, and this is an environment that is generally supportive for AUD.
  • In our view, China's June manufacturing PM, on Friday will remain firm above the 50 level consistent with economic expansion.
  • If however, we get a series of lower inflation reading in this week's U.S. and European inflation reports, led by lower energy prices, then AUD may come under some modest downward pressure, as market participants begin to doubt the even moderate pick-up in global inflationary pressures which is otherwise supportive for AUD/USD. Should this low-inflation downside risk eventuate, we doubt the downward pressure on AUD will be significant, because of the support Australia's low current account deficit (0.6% of GDP) is generating for AUD.
  • AUD/USD should continue to find solid support at the 200-day moving average of 0.7527.