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The Aussie’s almost metronomic climb over recent weeks ran into some hefty profit-taking overnight. After reaching a six-month high of 1.0845 earlier this week, the AUD is now below 1.07. Interestingly, the selling last night was fairly consistent, with traders successfully hunting for stop levels.
Two fundamental forces helped trigger the change in mood. Firstly, in its latest quarterly monetary policy statement the RBA revised down its forecasts for both inflation and growth for this year, and reiterated that it would be prepared to lower rates further “should demand conditions weaken materially”. Secondly, the latest China trade figures were, at least in headline terms, somewhat disturbing, with imports down by more than 15% YoY last month. As always with Chinese data around this time of year, caution is very much required because of the distortions imposed by the lunar New Year holidays.
These are still very lofty levels for the Aussie, notwithstanding last night’s decline. There is a whiff of ‘correction’ in the air for the AUD in the near term.
