AUD: The week ahead – ANZ

Research Team at ANZ, suggests that the domestic factors proved to be helpless against a powerful USD trend last week with an easing from the RBA as well as disappointing trade and building approvals data all unable to elicit any weakness in the AUD.

Key Quotes

“This provides a strong signal that for the AUD to decline we need to see a shift in global sentiment.

This week, the US payrolls report will be a focus with a very strong number (above 180k consensus) needed to drive a strong rally in the USD and put a real dent in the AUD.

Also of interest will be the data pulse out of China. More recently we have highlighted that the monetary aggregates are signalling a slowing in the economy. That message was also passed on in the PMIs. Should the lending data next week show that this weakening trend is continuing, it will have an impact on iron ore prices and – by extension – the AUD.

This is because the recent rally in iron ore prices was driven by a rally in steel prices. However that rally was based on industry consolidation and reduced supply. This is not a positive story for iron ore demand nor prices, and as such the hurdle for disappointment is low.

Finally, on the domestic front we will be watching the valedictory speech from RBA Governor Stevens ahead of his retirement. While we do not expect him to give much away on the near term policy trajectory, any comments of policy efficacy or the future role of monetary policy will be of note.”