Catch this Westpac snippet earlier in the week on the Aussie dollar
- The economic fallout from Russia’s invasion of Ukraine continues to support energy prices, bolstering prospects for Australia’s already large trade surpluses. But the Aussie remains at risk against a US dollar supported by the Fed’s determination to anticipate rate hikes and shrink its balance sheet, a significantly more aggressive tightening stance than the RBA (at least for now).
- Daily correlations to equity markets are high even by historic Aussie standards, so any further turbulence in equities could see a return to trading with the 0.68 handle (with occasional higher cuts).
- A recovery to 0.74 in Q3 remains likely.
- Australian growth is expected to be brisk in the second and third quarters, supporting prices from the RBA’s tightening, while Chinese policy will once again focus on infrastructure-led growth. And at some point, the support for the USD yield will hit the cyclical top.
AUD/USD update (daily candles:
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