AUD: Still expecting 0.75 before 0.85 – Westpac

Analysts at Westpac have stuck with a clear view that we would see 0.75/0.76 before year end rather than the 0.85 for AUDUSD pair, that some were forecasting in the market back in September.

Key Quotes

“This view was based on the idea that markets were under-pricing the Fed, overpricing the RBA and not pricing risks around softer China/ commodity prices through year end.”

“While the commodity picture has not deteriorated as much as we expected, the recent run of inflation and wage data has added to the sense that interest rate differentials will indeed become less supportive for the A$ through the end of this year.”

“However, the selloff in the A$ has been pretty orderly with the speculative community still sponsoring a decent long A$ position if CFTC data is a good indication. This then suggests we would probably need to see a move higher in the US$ before we see further AUD weakness.”