Maybank FX Insight - AUD - Onward to 0.70 - 19 May 2016

AUD: Onward To 0.70

      AUD fell from 0.78-highs to levels around 0.7200 as we write. The sharp pullback in iron ore prices and the surprise rate cut by RBA were the main drivers for the decline seen in May. We anticipate further declines in the AUDUSD.

      The outlook for domestic cost pressures was stressed as a “key source of uncertainty” and the central bank counts on the low exchange rate to “place upward pressure on inflation for a time”.

      In the next three months, AUD could head lower first on election uncertainties, fiscal slippages, concomitant impact on its AAA ratings and as markets start to price in a Fed hike.