AUD: Modest improvement in sentiment coming? – Westpac

With ‘trade wars’ set to run quiet for a few weeks; a reasonable pop higher in iron ore; a better than expected employment update and AUD appearing to trade well on crosses e.g. EUR/AUD we would not be surprised to see a modest improvement in the A$ ‘tone’ next week, according to Robert Rennie, Head of FM Strategy at Westpac.

Key Quotes

“However, CPI will dominate price action in domestic markets, and thus likely leave us in well rehearsed ranges into Wednesday. Justin’s CPI preview clearly highlights the 6 quarter bias that economists have shown, consistently forecasting higher CPI outcomes. Whether 6 becomes 7 will be critical for next week’s price action.”

“Beyond that though we stick to the view that a higher US$ on the back of strong Q2 data and rising trade war tension as we move into Aug/ Sep will likely see the A$ lower.”