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The Australian dollar certainly enjoyed the pro-risk environment and reconquered parity.

This reflects the global mood and not the situation in Australia.

  • Chinese weakness: Australia is still heavily reliant on the mining industry. More signs of weakness from China including the recent Chinese rate cut, play against the Aussie.
  • Relatively resilient job market: After a few disappointments, the recent jobs report from Australia was positive ,reflecting some stabilization in the economy. Housing and retail sales are the main points of weakness.
  • Rate movements: The RBA will probably pause in rate cuts unless Europe unravels. The prospects of more cuts are much lower. If Glenn Stevens and his colleagues do surprise with another cut, it will be a big disappointment.

AUD/USD might refocus on domestic issues during July and let go of Europe, at least partially, but if European headlines continue dominating the global news, Australian matters will be pushed to the sidelines, and the Aussie will continue moving according to the risk on/risk off mood swings.

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