Australian dollar bounce to be capped by China growth concerns amidst USD pullback

Australian house prices have increased at a rapid rate this year, with annualised growth accelerating to roughly 15% over recent months. 

"Australia's growth has been marked down reflecting a sharper forecast slowdown in China and patchy recovery in non-mining activity. The growth is now expected to remain sluggish for longer, trimming the growth forecast to 2.5% in 2015 and 3% in 2016, picking up to 3.5% in 2017", says Barclays. 

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, although at a very high level. China PMI will likely bear greater importance and cap the recent bounce in the AUD. 

"Given this revision, the RBA is likely 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", added Barclays.