AUD outperforms as iron ore price tumbles

Daily Currency Update

The Australian dollar outperformed through trade on Monday, despite softer domestic GDP indicators and a decline in iron ore prices. Iron ore was a notable underperformer among key industrial commodities, tumbling back below $100 a tonne, marking the end of a two-week upswing as China activity data at the weekend and through trade on Monday feel short of expectations.

With iron ore prices on the back foot, a 10.9% fall in mining profits lead to a broader 5% fall in Q2 Company Operating Earnings, adding to expectations of a contraction in GDP activity through Q2. Despite the lacklustre macro news, the AUD again toyed with a break above US$0.68, marking intraday highs at US$0.6792 having risen steadily on the heels of renewed demand for risk.

With US markets returning from the Labour Day weekend, our attentions remain affixed to the broader risk narrative. Domestic GDP markers offer further insight into tomorrow’s Q2 GDP print, while US ISM manufacturing data and July construction spending dominate the offshore ticket.

We expect ranges will be largely well contained as US non-farm payrolls due Friday cast a shadow across the weekly macro ticket.