AUD extends recovery and eyes break above US$0.6750

Daily Currency Update

The Australian dollar extended its uptrend Tuesday, advancing again against the USD and closing in on a break back above US$0.6750. The RBA minutes yesterday reaffirmed the board's commitment to bringing inflation back to target. Policy makers discussed the possibility of a rate hike and pushed back against market calls for rates to ease before the end of the year. With other major central banks entering or approaching easing cycles the RBA’s persistent hawkish view should help extend AUD upside in the face of ongoing USD softness. Further reports show that China will introduce measures to try to reduce the oversupply of housing and rescue the beleaguered property market, which has further fueled risk demand. Iron ore prices edged higher yesterday yet remain a drag on the AUD upside. The Red Gold has plunged 35% this year amid China's growth woes and a sharp contraction in demand for steel. With cheap iron ore flooding the market, a further decline in prices could put some downside pressure on the AUD and limit gains.
Our attention now turns to the Federal Open Market Committee Minutes for the July Meeting while US labour market data and Japan trade data dominate a largely quiet macro ticket.