We expect the AUD to remain a buy on dips against the USD.
First of all we see little room for the RBA to turn more dovish any time soon. This is especially true as the central bank has sounded more relaxed of late when it comes to the currency’s appreciation in the last few weeks.
Stable RBA monetary policy expectations combined with additional USD downside risk on the back of political uncertainty should make a case for the pair to trend higher, especially when considering further improving sentiment with respect to China.
In terms of events, this week’s focus will be on labour data. After last month’s disappointment, there appears to be scope for a constructive release. If so, further improving domestic conditions would support the notion outlined above.
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