AUD: Guided by the politics – Westpac

Sean Callow, Research Analyst at Westpac, suggests that the AUD normally ignores Australian political turmoil but price action this week is consistent with a degree of political risk premium, with AUD easily weakest in G10 despite a strong reading on Q2 construction data which produced upside risks to their 0.6% GDP forecast (5 Sep).

Key Quotes

“These jitters imply concern over an early election and of course the impression that the government will struggle to produce a cohesive policy message whoever is PM by the weekend.”

“But history strongly suggests AUD will resume ignoring local politics soon. Broad USD decline at times over the past week has helped AUD/USD bounce off the 19mth lows near 0.72, in what could be short-covering, judging by the chart across.”

“If US and China at least continue talking, the global risk mood should help stem losses above 0.7200 but capped ahead of 50dma at 0.7380.”