Snapshot note via Westpacon and their view on the Australian dollar.
Briefly:
We expect wider and higher ranges for the Australian dollar next month. Volatile French policy will have an impact on the global risk climate, but a resumption of encouraging disinflation trends in the US and renewed interest rate cut bets by the Fed should ultimately be more decisive.
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The AUD/USD pair remains in a volatile and challenging range between 0.6575 and 0.6715. Increased political and financial risks in France are negatively impacting the global risk climate.
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However, the Australian dollar should respect support around the 0.6550/60 area. The AUD/USD range rally continues to develop, with yield spreads potentially providing a safer floor.
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The US CPI, Producer Price Index and unemployment claims last week showed that lower inflation trends are resuming.
The Australian dollar, as WPAC saw, does not help:
- Commodity prices and overall sentiment in China are not helping. Iron ore prices have fallen 15% since mid-May, and port inventories have reached their highest levels in two years, despite efforts to ease a protracted real estate crisis.
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China's fundamental growth engines remain sluggish. May financing data shows credit demand by businesses and households continuing to slow, while May factory output and fixed investment suggest the recovery is already running out of steam.