The Australian dollar is currently looking at a significant divergence between internal and external drivers. Economists at ING expect the AUD/USD to extend its slide towards the 0.66 level over the coming days.
Big divergence between external and internal drivers
“The latest jobs numbers data came in very strong, as unemployment dropped to the lowest on record (3.5%) thanks to a sharp increase (88K) in employment. The RBA takes the labour market into consideration a lot, and we think the latest numbers might pave the way for even larger than 50 bps rate hikes.”
“China (Australia’s number one export market) may face new lockdowns, and the latest data showed a larger-than-expected slowdown. That out shadowed the positive news that Beijing may end its ban on Australian coal. At the same time, iron ore prices continued to be under significant pressure, having now dropped below $100 on demand concerns.”
“When adding a still strong USD and unstable risk appetite, we struggle to see an imminent rebound in AUD/USD. We could instead see a further drop to the 0.6600 mark over the coming days.”
