The AUD was gaining strongly due to its pro-cyclical bias. Vaccine fuelled optimism helped push AUD higher as did higher Iron ore prices alongside signs of China’s economy rebounding. However, recently that bullish bias has moved to a far more neutral footing.
A combination of the delta variant locking down large areas of Australia, RBA’s Lowe seeing no interest rate hikes until 2024, a contraction of at least 2% expected for Q2, falling Iron Ore prices, and a slowdown in China’s growth has all been weighing on the AUD. The last data points from China this week show a slowdown in both industrial production and retail sales.
