The worsened growth outlook for the world’s second economy is being reflected in downside pressure on the AUD, despite the fact that the price of iron ore has been holding up well and irrespective of the strength of Australia’s trade balance. 

Concern over the Chinese economic outlook suggests there is risk of dips to the AUD/USD 0.62 area on a 3-month view. However, we see the relative strength of Australian fundamentals as suggesting a recovery back to 0.70 on a 12-month view.