AUD/USD: Still the most vulnerable - ING

AUD/USD has retraced its losses, but the Australian dollar remains fragile amid cross weakness and persistent US-China trade tensions. With the RBA likely to cut in May and AUD still acting as a China proxy, downside risks remain firmly in place, ING's FX analysts Francesco Pesole and Chris Turner note.

China ties leave AUD exposed despite RBA outlook

"After a 6% temporary drop, AUD/USD is back at pre-liberation day levels. But the Aussie dollar is significantly weaker in the crosses, and the rebound has mostly been driven by the USD confidence crisis."

"AUD remains the key barometer of the US-China trade spat. While Trump's next move on trade has proven hard to predict, it is clear that tariffs on China are stickier than elsewhere. That places AUD in a still unfavourable situation."

"The Reserve Bank of Australia is widely expected to cut in May, although a 50bp cut (which is 40bp priced in) looks a bit too aggressive. Anyway, the RBA is a marginal driver of AUD, which remains more vulnerable than any other G10 currencies due to its China-proxy character."