Tensions rise over a policy decision by the Reserve Bank of Australia in July, with all the attention on Gov. Lowe’s speech next week, shortly before the release of Australian employment data for May. However, AUD / USD is even more closely correlated with the US dollar index than usual, so Westacp economists point out that the FOMC meeting is likely to be decisive.
RBA Lowe’s speech and job data in May
“Our main prejudice is the depreciation of the dollar, but we must prepare for volatility after the FOMC meeting.”
“A $ commodity price support remains very strong: iron ore spot price has returned to $ 212 per tonne, coking coal is at its highest levels since August 2019, and oil (thus LNG) is rising, although copper has declined.”
“We suspect that AUD / USD will see volatile price action after the close of the open market, but at a fair value of 0.84+, we are happy to maintain a long position from 0.7680, adding on the decline to 0.7580. If Lowe clearly supports those calling for QE cuts and job recovery in May, the fair value gap should narrow. ”