AUD/USD has regained positive traction on Thursday. However, there are a few arguments supporting a stronger aussie, economists at Commerzbank report.
A lot depends on further developments in China
“The market expects 25bp in June and a key rate of around 2.75% by year-end. Considering a further seven RBA rate meetings until year-end that results in more than 25bp at each meeting. Hawkish comments might support AUD, but in view of the market’s rate expectations, the RBA cannot really surprise on the restrictive end.”
“There is also the risk of the parliamentary elections on Saturday. If the formation of a government were to take time that would put subliminal pressure on AUD.”
“If the covid situation in China were to improve, AUD would be able to benefit. However, whether that will be sufficient to give AUD wings seems questionable to me.”
“Restrictive comments on the part of the RBA and an improvement of the situation in China would only allow AUD/USD to stabilise in the area of 0.70, preventing further losses.”
