AUD on a tear, will it extend? - ANZ

Analysts at ANZ acknowledged that whether you put it down to the more upbeat RBA minutes, the 30-odd% recovery in iron ore prices, the fact that Chinese activity has been surprising on the upside, or the generally weaker USD backdrop, the AUD has been on a tear of late, and is attempting to push back above 0.80 US cents for the first time since 2015. 

Key Quotes:

"NZD/AUD has subsequently fallen to its lowest levels since May, helped along of course by New Zealand’s surprisingly soft Q2 CPI report. Given the pace of the move, it appears the market has been caught out by this turn of events – we have too – as many economic indicators (GDP growth, unemployment, fiscal position, business cycle position, external debt etc) continue to sit in New Zealand’s favour. But as is often the case with this cross, any hints of a change can see abrupt moves. 

Will it extend? 

We are not yet convinced, and the Australian labour market report today will provide a nice test. Our Australasian colleagues expect a 20k lift in employment and for the unemployment rate to be stable at 5.5%. That certainly doesn’t sound bad, especially with 140k jobs already created over the prior three months, but with market expectations ratcheting up too, we suspect there is a decent hurdle to generate upside AUD surprises."