AUD/USD: Rally can extend this summer – ING

Higher chances of Trump winning in November means trouble for the China-sensitive Australian Dollar (AUD) in the longer run. The Reserve Bank of Australia (RBA) is perhaps facing the worst inflation issue in G10, ING’s FX strategist Francesco Pesole notes.

AUD still has room to run this summer

“Higher chances of Trump winning in November spell trouble for the China-sensitive AUD in the longer run. But the tactical picture hinges much more on US macro and domestic central banks.”

“The RBA is perhaps facing the worst inflation issue in G10, with consistently hot monthly CPI prints taking it closer to another hike. 31 July will be the decisive day: 2Q CPI data are out, and if they surprise on the upside, we think the RBA will hike in August.”

“Even if another hike can be averted, the prospect of cuts is increasingly remote. Given our view that markets will reward currencies with hawkish central banks, AUD still has room to run this summer, before the US election becomes too close to ignore.”