AUD/USD to remain stuck in the middle of 0.63 – 0.65 range: China woes, dovish RBA

This snippet via Mizuho on the Australian dollar. In a (very) brief summary of the piece:

China Woes:

  • The sheer magnitude of balance sheet and cash-flow shocks mean stimulus, including rate cuts are mere signals not solutions.
  • Especially as further property sector and wealth management product risks threaten with fresh
    balance sheet and cash-flow shocks.
  • fresh assaults on CNY stability pose an overarching policy challenge and dilemma; given
    sharp stimulus and stability trade-offs.

And thus to the AUD:

  • only just averting a slip back below 0.64 and hardly showing any signs of traction.
  • One reason for this is that clarity on Chinese measures to revive a construction boom continue to
  • And even for optimists, it appears that it will take a while to get the economy back on its feet.
    – In which case, commodity channel drag forces on AUD are not materially reversed into a boom.
  • What’s more, perceptions of a more dovish RBA also stand in stark contrast to continued G10
    tightening elsewhere.
  • For now AUD could remain under the weather in the mid-0.63 to 0.65 range.

This article was written by Eamonn Sheridan at Source