More Bad News For The AUD

It’s going to be an important week for the Aussie Dollar with the RBA policy decision set to be a very interesting one given the recent developments.

From the middle of Q1, the AUD has been trending lower and lower against most of its major peers, with only the JPY being weaker than the AUD.

Throughout this time, we’ve held a weak bullish bias for the AUD, given the continued positive risk appetite in the med-term, the better-than-expected econ data, better-than-expected economic recovery post-pandemic, as well as commodity prices surging (which favoured Australia’s terms of trade).

However, recent developments have made us change our fundamental outlook for the AUD from weak bullish to neutral, given the heightened uncertainty on a couple of different fronts. The current virus situation is a big complication for the Australian economy as well as expected policy normalization from the RBA.

Seasonality is the other negative factor. In the last 20 years, August has been the worst performing month for the AUD with an average performance of -0.95% and seeing losing months 70% of the time.

The other interesting driver this week was Iron Ore futures that suffered some punchy moves lower on

Thursday and Friday, with TSI Iron Ore futures down close to 13% at the time of writing.
But, as always, we’ll have more information on all of this in today’s video.