Commodity bloc could retreat further - BNPP

Research Team at BNP Paribas, suggests that high iron ore and coal prices have supported the AUD recently, but the sharp fall in iron ore prices seen yesterday could be a catalyst for a move lower in AUD against the rest of the commodity bloc.

Key Quotes

“Over the past days, AUD and NZD retreated somewhat, following broader USD strength and a pull-back in the prices of their commodity exports. The USD is rising broadly, which we think will pressure commodity prices lower and push USDCNY higher. Higher US rates makes the already-poor carry on the commodity bloc currencies look even less attractive. Overnight in Australia, the wage price index was slightly lower than expected.  Elsewhere, CAD has reached our year-end target of 1.35 but we still think that there are good reasons to be bullish USDCAD.”