AUD/USD: Not bearish? - Westpac

The past week saw AUD/USD dip to lows dating to June 2017, but the lack of fireworks on the Aussie’s break of 0.7500 hints that investors aren’t particularly bearish, according to Sean Callow, Research Analyst at Westpac.

Key Quotes

“Australia’s domestic news and data could help the Aussie dollar’s mood.”

“In last week’s policy meeting and quarterly Statement on Monetary Policy, the RBA retained its upbeat view on Australia’s economic outlook, projecting 3.25% GDP growth in 2018 and 2019. Tuesday’s federal budget could reinforce this optimism, with heavy hints of cuts in corporate and personal tax rates, plus extra spending on infrastructure. The RBA also nudged up its inflation forecasts and made clear that its baseline view is that higher interest rates will be “appropriate at some point.” This should be supportive for AUD.”

“Furthermore, iron ore prices have picked up and in March we saw a A$1.5 billion trade surplus, adding to the positive mood. If Australia’s domestic news remains supportive, then in the week ahead, AUD should be able to extend gains against currencies such as EUR and GBP whose respective data momentum has weakened. But it could also probe US$0.76 if it also finds extra support from commodity prices and global risk appetite.”

“Event risk: Aust Mar retail sales, 2018/19 federal budget, NZ Q2 inflation expectations, China Apr trade balance, Fed chair Powell speaks (Tue), RBNZ policy decision, China Apr CPI, Philippines and Malaysia policy decisions, Bank of England MPC policy decision, US Apr CPI (Thu), Aust Mar housing finance approvals, US May consumer sentiment (Fri), US decision on Iran nuclear deal deadline (Sat).”