2 Dec 2015
AUD due a reversal? - ANZ
FXStreet (Guatemala) - Analysts at ANZ recently noted that the AUD has performed relatively well over the past few weeks, taking some heart from the recovery in emerging market sentiment and in the continued stability of the long end of the US curve.
Key Quotes:
Domestic news has been a part of this rally, with the surprisingly strong employment print contributing to the boost. RBA pricing is currently suggesting only around half a 25bp cut is expected by mid-next year - a significant shift from a few weeks ago when the market believed the RBA would cut the cash rate twice by then.
Given this move, we think the risks are now skewed to another rally (in bank bills) and this would undermine the AUD. The market has been very reactive this year, and any shift in the tone of the data (like that seen in CAPEX print) should drive a reversal.
In addition, with financial market sentiment and RBA pricing in focus, the AUD has traded very well relative to the poor performance in commodity markets. Should the market take note of this divergence, it will also undermine the AUD.
Key Quotes:
Domestic news has been a part of this rally, with the surprisingly strong employment print contributing to the boost. RBA pricing is currently suggesting only around half a 25bp cut is expected by mid-next year - a significant shift from a few weeks ago when the market believed the RBA would cut the cash rate twice by then.
Given this move, we think the risks are now skewed to another rally (in bank bills) and this would undermine the AUD. The market has been very reactive this year, and any shift in the tone of the data (like that seen in CAPEX print) should drive a reversal.
In addition, with financial market sentiment and RBA pricing in focus, the AUD has traded very well relative to the poor performance in commodity markets. Should the market take note of this divergence, it will also undermine the AUD.