FXStreet (Edinburgh) – FX Strategist Greg Gibbs at RBS expects the Aussie dollar to weaken further in the medium term.
Key Quotes
“AUD has fallen in sympathy with the NZD and CAD. Its slide in the last month reflects the deeper fall in iron ore prices and energy prices. As such, it too is facing more commodity pressure. However, the contraction in its mining sector, while still having more than a year to run, had been underway for almost two years and is already significantly in the price”.
“The RBA is currently more circumspect on the need to further cut rates, although it maintains an easing bias. Recent economic reports in Australia have proved to be firmer than expected, including a rebound in business confidence, more stable and trend like employment growth, and on-going rapid growth in the residential housing sector. The economy is also seeing solid support from Chinese investment in its property sector”.
“At this stage it appears that short commodity currency trades appear better placed in CAD and NZD. Nevertheless, the AUD will be vulnerable to any faltering in economic activity with low wages growth outcomes. A key determinant of further rate cuts will be evidence of lower than expected CPI inflation (due next week) and further evidence that excesses in lending for housing is being contained”.
“As such, we still expect further declines in the AUD, especially as we anticipate pressure for policy tightening in the USA to gradually build over the rest of the year”.
(Market News Provided by FXstreet)