Before I get to Australian dollar specifics ... Barclays note the market focus on the FOMC meeting this week:
- Markets remain reluctant to price additional Fed tightening, inducing risks of a USD rebound should the Fed reiterate its commitment to policy normalization
And also in the US:
- US Q2 GDP data this week should confirm that existing capacity pressures justify further policy normalisation
They (Barclays) aren't impressed with a 'bleak' UK though:
- UK economic data, including Q2 GDP which we forecast to grow at 0.2% q/q, likely will remain bleak, and continue to weigh on the GBP
OK, onto the world's most important country and currency (you know I'm biased, right?), here are Barclays' thoughts on the AUD for the week:
Australia's CPI and RBA Governor Lowe's speech on Wednesday have the potential to disappoint premature hawkish expectations by investors, weakening the AUD
- Trade for the week ahead: Short AUDUSD spot.
We recommend being tactically short AUDUSD given our expectation for a weaker CPI print and the risk that Governor Lowe could express discomfort with recent AUD strength.