AUD: Striking resilience - Westpac

According to Sean Callow, analyst at Westpac, AUD resilience in recent days has been striking as the 30 day and 60 day correlations between global equity movements and AUD/USD remain quite high.

Key Quotes

“But the Aussie has been able to brush off the step lower in equities, even with much of the investor angst being due to the US-China trade standoff.”

“Providing insulation is the surge in iron ore prices, especially in A$ terms, a handy boost for the federal budget position when parliament reconvenes in July with tax cuts high on the agenda. But the role of supply interruptions is widely understood in the iron ore rally, with Australia’s overall export basket actually a little lower since mid-May.”

“AUD/USD price action implies a market already very short. Yet we wonder if this resilience can be sustained as the RBA surely cuts the cash rate on Tue and indicates that there is further easing ahead. GDP growth is also shaping up as not much better than the dismal H2 2018. Look for probes to 0.6960/70 to falter, back towards 0.6865.”