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.
