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A number of things have gone well for the Australian dollar in recent months. Even so, the currency has been strongly underperforming, particularly against the KRW, CNY, NZD, SGD and CAD, ANZ analysts noted in their FX monthly outlook. 

Trade war uncertainty has lifted, if only temporarily; and copper and Yuan, have both rallied strongly. Further, the iron ore market has rallied to 12-month highs and forward indicators of the global production cycle (from Korean exports to PMIs) have improved.

Despite these developments, the AUD has so far failed to find strong hands. It has remained relatively range bound and seems caught below its 200-day moving average at 0.6870.

Key quotes

The AUD is decoupling from global sentiment as its carry erodes and the Chinese industrial cycle becomes a function of policy-makers structural imperatives, more than a beta to broader global demand.

The AUD has been held back by the market’s views of the risks to the domestic economy. Indeed, market pricing is still showing an expectation of at least one RBA rate cut over the next few months. This is in contrast to many other G10 economies, where the recent stabilisation in sentiment has unwound all expectations of further easing.