23 Feb 2015
AUD/USD: Potential for further upside near term limited - Westpac
FXStreet (Bali) - According to Westpac FX Strategy Team, the potential for further upside in AUD/USD near term is limited.
Key Quotes
"Last week the Aussie dollar rallied on both the RBA and Federal Reserve (FOMC) minutes, before pulling back on somewhat misinterpreted headlines regarding Australia’s AAA rating (in short, it is safe for some time)."
"With AUD/USD almost 2 cents above the post-rate cut lows, it is fair to ask whether there is substantial further upside near term? We suspect not. To be sure, the market was right to lower the probability of a March cut in response to the minutes."
"But another easing is fully priced by May and yet another cut, to 1.75%, by Dec 2015. This is 25bp lower than Westpac’s base case, a factor in our more positive view on AUD/USD in H2 2015."
"But near term, it is hard to see AUD gaining much from the interest rate outlook, with the RBA minutes seemingly taken as cause for some rearrangement in Q1 vs Q2 rate cut risks but not producing doubts over the scale of further easing."
Key Quotes
"Last week the Aussie dollar rallied on both the RBA and Federal Reserve (FOMC) minutes, before pulling back on somewhat misinterpreted headlines regarding Australia’s AAA rating (in short, it is safe for some time)."
"With AUD/USD almost 2 cents above the post-rate cut lows, it is fair to ask whether there is substantial further upside near term? We suspect not. To be sure, the market was right to lower the probability of a March cut in response to the minutes."
"But another easing is fully priced by May and yet another cut, to 1.75%, by Dec 2015. This is 25bp lower than Westpac’s base case, a factor in our more positive view on AUD/USD in H2 2015."
"But near term, it is hard to see AUD gaining much from the interest rate outlook, with the RBA minutes seemingly taken as cause for some rearrangement in Q1 vs Q2 rate cut risks but not producing doubts over the scale of further easing."