China growth concerns to cap AUD bounce amidst USD pullback

The ABS home price index (Tuesday) is the only important domestics release for the week. House prices have increased at a rapid rate this year, with annualised growth accelerating to roughly 15% over recent months. However, with the bank regulator, APRA, recently tightening macroprudential policy further, including by raising rates for investor home loans roughly 25bp, there are signs that demand may be peaking, albeit at a very high level. China PMI will likely bear greater importance and cap the recent bounce in the AUD. 

"We have marked down Australia's growth reflecting a sharper forecast slowdown in China and patchy recovery in non-mining activity. We now expect growth to remain sluggish for longer, trimming our growth forecast to 2.5% in 2015 (previously 2.7%) and 3% in 2016 (3.3%), picking up to 3.5% in 2017. Given this revision, we now forecast the RBA to keep the cash rate steady for longer than we previously expected, with policy unchanged until mid-2017. That said, the near-term risk of a rate cut due to China remains", notes Barclays.