AUD: The Week Ahead - ANZ
Research Team at ANZ, notes that the AUD has been launched higher by the weaker than expected US payrolls report, which undermined near-term expectations for rate hikes from the Fed.
“This move then extended after the RBA struck a surprisingly neutral note in its post meeting statement.
While we think that the move has been somewhat exaggerated, with the RBA now on the sidelines, the hurdle rate for further weakness in the AUD has risen significantly. For currencies to weaken in the current environment we need both domestic weakness and USD strength. With little domestic data to speak of in the week ahead, this puts a microscope back onto US data, and onto the forecasts of future expected hikes from the Fed.
While there is some risk that the Fed reduces its rate hike expectations for 2016 to just one hike, this looks largely in the price now. For a more sustained rally in the AUD, we think that the Fed will also need to change its 2017 forecasts – something that we think is still unlikely.
In addition, we would likely need to see some further data weakness in the US. In light of this, the upcoming retail sales print is going to be important. Domestically, the only notable release will be the business confidence report, which should continue to highlight a decent pace of growth and thus maintain support for the AUD on crosses.”