Asset managers continue to repeat their mistakes. In November 2022 they added up to AUD bearish trades to the highest levels in 8 months. However, an improvement in global risk appetite, a faster opening of the Chinese economy than expected and positive Australian labor market data forced traders to set back. A year and a half later, history repeated itself, pushing AUDUSD to a two-month high.
This time, money managers added up to net shorts to a record high due to expectations of a reduction in the cash rate by the RBA following the release of weak Australian inflation data, a sluggish economic recovery in China, and a fall in iron ore prices from $140 to $100 per ton. However, all the negativity was surpassed by Jerome Powell's statement about the imminence of the first Federal funds rate cut. The US dollar collapsed against the world's major currencies, and AUDUSD bears were once again discouraged.
AUD buyers mention strong PMI growth, imports and consumer prices in China from January to February and hope that iron ore will anchor near $100 per tonne. While large producers such as BHP and Rio Tinto have low costs and high margins, their smaller competitors will be forced to curtail production, which will support prices. However, major players can easily take their place, especially in conditions of weak demand from China. The country's gains could be attributed to Lunar New Year celebrations, which boosted domestic demand. From March onwards, the economy will struggle without additional stimulus.
AUDUSDbulls should not rely too much on Australia's GDP growth, which is associated with active immigration. On a per capita basis, the figure fell by 0.3% QoQ and 1% YoY in the fourth quarter. 13 cash rate hikes to a 12-year high of 4.35% contributed to this.