AUD/USD to trend lower medium-term - Rabobank

Analysts at Rabobank are sceptical about the durability of the current better tone of AUD/USD and expect it to trend lower over the medium-term.

Key Quotes:

“The release of better than expected Australian April retail sales data at 0.4% m/m this morning injected a spurt of life into AUD/USD. That said, the AUD had already been performing well in recent sessions. Not only is the Aussie the best performing G10 currency on a 1 day view, but in a 5 day horizon also. Since its May 9 low, AUD/USD has risen a little over 3%, putting a dent in the downtrend that dominated between late January and early May.”

“The recent gains in the AUD appear to reflect some optimism that the net offering from this week’s Australian retail sales and Q1 GDP data in addition to the RBA policy meeting could be leave a more positive outlook in the market. That said, we are sceptical as to the durability of the better tone and continue to expect AUD/USD to trend lower medium-term.”

“Although there have been recent improvements in the labour market and a step up in the national minimum wage, the dual impact of low wages and high household debt will continue to hinder the outlook for consumer demand and CPI inflation. Not only that, but policymakers are likely to be wary as to how Australia might be impacted in a trade war between the US and China.”

“It remains our view that the RBA will remain on hold this year. Given our broadly USD positive outlook we maintain a 6 mth forecast of AUD/USD 0.74.”