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AUD

15 Dec 2023

Dawn is breaking.

We see the Australian dollar edging higher over the next few quarters. This stems from our assessment that the US dollar should gradually lose ground, as growth differentials move against the US following a period of exceptionalism, as tighter conditions crimp activity, and Chinese stimulus measures gain traction, spilling over positively elsewhere. At the same time, on the back of our assessment that the Reserve Bank of Australia may be slower to move and/or deliver less interest rate relief than its peers elsewhere, short-dated yield differentials are expected to shift in support of the Australian dollar. According to our projections,...

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14 Dec 2023

US Fed pivot has further to run

The US Fed’s ‘dovish’ turn at its mid-December meeting, where it effectively called time on the rate hiking phase and opened the door to easing down the track, has reverberated across markets. Global interest rate expectations have adjusted lower and bond yields tumbled, growth linked risk assets such as equities and commodities have risen, and the USD’s downturn took another leg lower. This mix has pushed the AUD (now ~$0.67) to the top of its multi-month range, a long way (nearly 7%) from its late-October lows. While the Fed’s pivot looks to have stunned many, it wasn’t a surprise to...

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14 Dec 2023

USD downturn deepens

• Central banks. ECB & BoE kept rates steady but tried to push back on policy easing expectations. This helped EUR & GBP with the USD still under pressure.• Fed impacts. The US Fed’s dovish turn has continued to reverberate across markets. Bond yields fell again & risk sentiment remains positive.• AU jobs. Employment exceeded forecasts & while unemployment ticked up it remains low. China data batch due today. This can impact the AUD. Following yesterdays ‘dovish’ pivot by the US Fed and signals that rate cuts will probably be the next step, central banks remained in focus overnight. As...

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13 Dec 2023

Fed pivot jolts markets

• US Fed. A ‘dovish’ pivot by the Fed. Comments & updated forecasts point to the next step being policy easing, with several cuts projected in 2024.• Market repricing. US bond yields tumbled as markets adjusted their thinking. This weighed on the USD & propelled the AUD & risk markets higher.• AU jobs. After a strong Oct., there are risks to the Nov. data. This may exert short-term pressure on the AUD, but it shouldn’t change the bigger USD driven trend. All eyes were on the US Fed meeting and press conference this morning and the ‘dovish’ tilt we were...

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12 Dec 2023

US Fed in the spotlight

• Market swings. Some intra-session vol. around the US CPI. But net market moves have been modest. USD softer, though lower oil prices held down the AUD.• US inflation. Data matched predictions. Headline inflation slowed to 3.1%pa, while core steady at 4%pa. Firmer services shows the last leg could be difficult.• US Fed. No policy change expected. While the Fed should reiterate it may do more if needed, we think the forecasts should show that the next move will be a rate cut. There has been a bit of market volatility overnight around the release of the latest US CPI...

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