Analysts at ING point out that the near-inevitable resignation of Australia’s Prime Minister, Malcolm Turnbull, on Friday resulted in a leadership contest that saw Treasurer Scott Morrison narrowly pip Home Affairs Minister Peter Dutton to become Australia’s sixth leader in just over a decade.
Key Quotes
“While the AUD saw a knee-jerk move higher on Morrison’s appointment, the fragile political backdrop still remains a cause of concern.”
“The week ahead sees the closely watched 2Q Private Capex data (Thu) v with markets expecting a minor uptick to 0.6% (versus 0.4% prior). This may provide a bit of temporary support to the AUD.”
“But as ING’s Rob Carnell astutely notes, there are other reasons to expect some medium-term weakness in the AUD though – namely because we aren’t convinced that the economy is in as good shape as the popular view on Australia runs.”
“An absence of RBA policy changes over recent years has allowed household debt to balloon. Meanwhile, the property market across almost the entire country is beginning to cool, and we doubt an about-face in lending standards by APRA will be sufficient, or fast enough to turn it around.”
“Based on this, we’re inclined to say that AUD/USD will see greater risks of running down to 0.70 (rather than recovering above 0.75) – although this will also depend on the broader global economic outlook and USD profile.”
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