AUD: Commodity price fall shouts for more stimulus – HSBC

By FXStreet FXStreet (Delhi) – Research Team at HSBC, suggests that as commodity prices fall further more economic stimulus may be needed to shore up the Australian economy and ideally this would come from a lower AUD.

Key Quotes

“Commodity prices have fallen further in recent weeks. Weaker Chinese demand is part of the story, as an expected boost in infrastructure has not materialised and housing investment is yet to lift. HSBC has cut its China growth forecasts for 2016 (from 7.2% to 6.7%).”

“At the same time, more commodity supply is hitting the market. Australia’s iron ore production is ramping up further and OPEC’s lack of agreement means more oil on the global market too. Thankfully for Australia, growth is shifting to the non-mining sectors.”

“However, an even lower AUD would still be helpful, given the further fall in commodity prices; the AUD has been rising in recent weeks. The RBA may soon have to crank up its ‘jawboning’ to get the currency lower if Australia’s rebalancing act is to maintain its pace.”

“However, the recent fall in commodity prices has not been matched by a falling AUD; instead the currency has risen. Of course, low inflation means the RBA has room to move further …read more

Source:: FX Street