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14 Aug 2014
AUD/USD potential decline to 0.90 in 6m – Rabobank
FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, remains on the view that the AUD could head towards 0.90 vs. the greenback in the medium term.
Key Quotes
“Last week’s release of a shockingly high unemployment rate has forced investors into rethinking the outlook for the Australian economy. Changes to the sample used to create the unemployment data have been partly attributed for the spike in the July rate to a 12 year high of 6.4%. Nevertheless, it would be foolhardy to ignore the risks that still face the Australian economy”.
“In recent months, fears of slowing Chinese growth have been offset by the decision of the country’s authorities to provide stimulus to some specific areas. That said, the release of very weak Chinese credit growth in July, should re-establish some of these concerns”.
“Insofar as China is Australia’s biggest trading partner and given the AUD’s sensitivity to generally levels of risk appetite, we foresee risk that the AUD could be again dragged lower by poorer news on China in the months ahead”.
“The RBA’s downward revisions to both GDP and CPI inflation forecasts last week make clear the concerns of the central bank. While the market perceives that the risk of another rate cut is back on the table, fear that this may add further accelerant to house prices will likely ensure that the RBA retain a preferred for a period of steady policy for the time being”.
“Bearing in mind the economic risks we retain our forecasts that AUD/USD could edge down towards 0.90 on a 6 mth view and back towards 0.86 in 12 mths”.
Key Quotes
“Last week’s release of a shockingly high unemployment rate has forced investors into rethinking the outlook for the Australian economy. Changes to the sample used to create the unemployment data have been partly attributed for the spike in the July rate to a 12 year high of 6.4%. Nevertheless, it would be foolhardy to ignore the risks that still face the Australian economy”.
“In recent months, fears of slowing Chinese growth have been offset by the decision of the country’s authorities to provide stimulus to some specific areas. That said, the release of very weak Chinese credit growth in July, should re-establish some of these concerns”.
“Insofar as China is Australia’s biggest trading partner and given the AUD’s sensitivity to generally levels of risk appetite, we foresee risk that the AUD could be again dragged lower by poorer news on China in the months ahead”.
“The RBA’s downward revisions to both GDP and CPI inflation forecasts last week make clear the concerns of the central bank. While the market perceives that the risk of another rate cut is back on the table, fear that this may add further accelerant to house prices will likely ensure that the RBA retain a preferred for a period of steady policy for the time being”.
“Bearing in mind the economic risks we retain our forecasts that AUD/USD could edge down towards 0.90 on a 6 mth view and back towards 0.86 in 12 mths”.