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Watch steel prices for next Aussie moves - BAML

FXStreet (Mumbai) - It’s not China neither the Fed, the key driver for the Australian dollar will be development in steel prices, the research team at BAML noted on Thursday.

Key Quotes:

"We have often argued that steel prices provide the best metric of China's underlying demand for Australia's key exports of iron ore and coal, both inputs for steel production,"

"Steel prices have fallen by 4.3% since China's fixing reform on August 11, consistent with the decline in AUD that we expected following the RMB depreciation."

"While these (China’s easing measures) have seemingly not helped overall growth, there is evidence of stabilization in property and infrastructure sectors that are the predominant users of steel."

Outlook on the Aussie

"We are comfortable with projecting only a small further decline in AUD/USD by December,"

"We continue to expect it to reach $0.65 in 2016 as capital inflows into Australia's resource sector decline."

"Over the coming months, this would present an opportunity for AUD to outperform against some crosses, most notably the EUR, in our view."

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