AUD/USD: Ongoing USD Resilience And weaker CNY Justifies 0.65 – NAB
The Australian dollar is suffering from trade wars and worries about a recession. Where next?
Here is their view, courtesy of eFXdata:
NAB Research discusses AUD outlook in light of revising lower its year-end target to 0.65.
“The USD is proving impervious to the narrowing of its interest-rate advantage over other major currencies. In large part, this is because it doesn’t reflect a deterioration in the US growth outlook relative to the rest of the world and markets are skeptical further monetary easing outside the US will do much good when slowing global trade is a prime cause of economic weakness. This means the USD is seen staying ‘stronger for longer’,” NAB notes.
“Our recently updated forecasts assume that the proposed 10% tariffs on most of the $300bn of currently untariffed Chinese imports is implemented (albeit in many cases not now until December) and that China, having permitted USD/CNY to rise above 7.00, will allow a rise to the 7.35-40 area to partially offset this. The latter is consistent with AUD/USD near 0.65 given the very strong correlation in recent years,” NAB adds.
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