AUD: Iron ore deficiency could start to kick in – ING

Despite a healthy Australian jobs report, positive Chinese GDP surprise and soft US dollar environment, AUD/USD has failed to make much headway above the 0.80 level, notes the research team at ING.

Key Quotes

“We’re not overly surprised given that investors are likely to view this as the RBA’s threshold for increased currency jawboning – especially while local inflation remains benign. The next major catalyst to test this will be the 4Q CPI data (31 Jan) - until then, we expect external factors to continue determining AUD's near-term direction.”

“On that note, a channel of recent AUD support – rising iron ore prices – looks set to revert; our commodities team see the rally up to US$75/t as overdone now and expect a return to US$55/t by 2Q18. An added headwind is the spectre of US steel tariffs – President Trump now has the Commerce Department’s Section 232 report and has 90 days to decide on recommended policy actions (the aluminium report will be released on Monday). Given that this could occur anytime, the unpredictability may act as a limiting factor for AUD bulls in the absence of any other major catalysts.”