AUD: Spec positioning appeared to be a headwind - Westpac

Sean Callow, Research Analyst at Westpac, explains that they pointed out earlier that spec positioning appeared to be a headwind for AUD “in the event of any rise in risk aversion or broad USD bounces” and have had both of these in recent days and AUD/USD has indeed struggled, probing lows since 18 July (RBA Jul minutes).

Key Quotes

“Still, AUD has held up fairly well on many crosses, even against the euro which normally outperforms as risk aversion rises. Commodity prices remain a source of support, with our Aust export price index reaching 3 month highs.”

“Australia’s domestic mood is mixed but decent enough to leave market pricing for the RBA cash rate about flat into year-end. Business sentiment is very strong, consumers are pessimistic but not dramatically so. Wages growth should remain low but the RBA is ready for this, while any July jobs disappointment would be seen in the context of the recent rebound. Overall, if global jitters persist then AUD/USD could probe 0.7800.”