AUD: 3 reasons to be constructive – Goldman Sachs

Goldman Sachs' analysts offer their thoughts on Tuesday’s Reserve Bank of Australia (RBA) monetary policy decision while remaining constructive on the Aussie dollar.

Key Quotes:

“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.”