GS comments on the Australian dollar, the bank have three reasons to be constructive on the currency:

Australia's activity data have generally been on the disappointing side in recent weeks

  • especially the collapse in the NAB Business Survey
  • and accelerating declines in house prices

As a result, despite some tentative evidence of firming inflation pressures, our economists flag that the RBA could drop its hiking bias in the minutes to (Tuesday's) meeting

However, FX price action … is again a useful reminder that domestic activity is just one small part of what drives AUD, and we see three reasons to be constructive:

  • Higher iron ore prices will support the terms of trade
  • China-related risks seem to be moving in a more constructive direction
  • We think the Fed's "patient" policy stance should support