The Australian dollar has opened the week at 0.7658 after falling for 2 days in a row to end the week. It’s the first time the Aussie dollar has done that in two months according to Marc Chandler, Brown Brothers Harriman’s chief currency strategist.
The selling appears to have been a combination of some technical selling and the weaker than expected Chinese data dump last Friday. That sapped the strength of growth proxies like the Australian dollar and copper, both of which were lower Friday even though the US dollar was a touch weaker.
Looking at the week ahead CBA currency strategist Elias Haddad says there is much to focus on with the key this week being “the August RBA meeting minutes (Tue), Australia’s Q2 wages (Wed) and July labour report (Thu)”.
He’s on the lookout for weaker prints than expected for wages and employment to ramp up the expectations of another RBA rate cut in November from the current level of market pricing which reflects a 53% probability.
On the other side of the AUDUSD cross, the US dollar side, Haddad says he expects the “the USD to trade on the defensive during most of the week on soft US economic activity”.
It all adds up to an expectation that “AUD/USD will likely remain within a 0.7545-0.7755 range this week”.
But Chandler says the Aussie will remain supported even on dips because “the Australian dollar resilience in the face of lower rates is that it still is the highest yielding reserve currency, and it is a AAA credit to boot”.
He also added that the change in leadership at the RBA won’t spook anyone either.
“With Stevens retiring in the middle of next month, Deputy Governor Lowe will take over. There is a sense of great continuity with the RBA’s reaction function”, he said.