BNP Paribas remains short AUD via a long EURAUD trade via options.
"This is in line with STEER, signalling the short-term fair value for EURAUD currently stands at 1.5112. Net long AUD positioning has started to moderate according to BNPP FX Positioning Analysis falling to +3 this morning from +8 a week earlier – its largest long since November 2014. The RBA did not step up FX rhetoric at the March meeting, but with trade-weighted AUD up another 4% since then, Governor Stevens will get a chance to clarify the Bank’s message on Tuesday," BNPP notes.
Markets are also long CAD at +5. Canada’s government is due to announce its budget on Tuesday. Anticipation of increased fiscal spending has allowed the BoC to refrain from easing and helped the recovery in the CAD. However, in the likely absence of significant spending beyond what has already been signalled, we believe this is already priced in and in any case our economists expect only a moderate fiscal boost to GDP in 2016.
With short CAD positioning unwound and the risk of the BoC turning more resistant to FX strength we believe USDCAD will rebound going forward," BNPP adds.
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