AUD news - page 13

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Commonwealth Bank of Australia change their RBA rate call - on hold during 2017


CBA previously expected a Reserve Bank of Australia rate cut in Q2 of 2017

  • Now expecting on hold all of next year
via Bloomberg
 

AUD/USD forecast for the week of November 21, 2016


The Australian dollar fell significantly during the week, reaching towards the 0.7350 level. This is a market that quite frankly looks extraordinarily vulnerable at this moment. And I believe that if we rally it’s a selling opportunity on signs of exhaustion. This is a market that will continue to favor the US seller just as the rest the Forex world has, and with that I have no interest whatsoever in selling as this candle has been very bearish looking indeed. I believe that we will try to reach the 0.70 level underneath.



 

AUD/USD Weekly Forecast November 21-25


AUD/USD tumbled in the past week, posting the largest weekly loss since the start of May when the Reserve Bank of Australia surprised the markets with a rate cut. The RBA delivered minutes from their latest monetary policy meeting and labor figures were reported out of Australia. The US Dollar continued to dominate with the trade-weighted index (DXY) posting ten consecutive daily gains as markets have essentially fully priced in a rate hike next month and are increasingly optimistic of a pick-up in inflation next year.

The RBA has taken a more neutral tone to monetary policy since the last rate cut in August, and the minutes released this past week reaffirmed little potential for further easing. The central bank expects that their easing efforts this year as well as tightening in the United States will help to lower the exchange rate and boost inflation over the next two years.

Australian labor data indicated stronger full-time jobs numbers, however, employment change fell short of expectations with an increase of 9,800 jobs versus the expected 20,300 jobs. The unemployment rate remained unchanged at 5.6%. Overall the pickup in full-time jobs will be somewhat encouraging but the shortfall in the employment change figure provided no reason for markets to turn bullish the Aussie Dollar.

The US Dollar has been trading sharply higher since the US election and the Dollar index has posted ten consecutive daily gains, breaking to 13-year highs over the past week. A technical break of a consolidation that has been taking place since March 2015 provides a clear bullish signal, and increased optimism for a December rate hike provides the fundamental backdrop for a stronger Greenback into the December FOMC meeting. At the end of the week, the Futures market has indicated a 95.4% probability of a rate hike next month.

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The latest from ANZ's Senior Rates Strategist Martin Whetton on the Australian economy, dollar and rates


  • We flagged the potential of the Australian rates market starting to price in rate hikes (which it did while we were there), though we noted that this was not a realistic view of the prospects for hikes
  •  ...  economy, Australia appears in aggregate to be performing well, there are a number of spots to watch. These include elevated house prices, weak wages, slowing employment gains, significant headwinds on the budget, and a slowing labour market
  • The AUD is expected to trade within a broad range on the cross to the JPY
  • With most investors holding AUD unhedged, the recent commodity strength has been useful
 

ANZ / Roy Morgan Weekly Consumer Confidence from Australia

Comes in at 115.5
  • Down from 118.2 the previous week
 

Australia: Q3 Construction Work Done: -4.9% q/q (expected -1.6% and prior -3.7%)

Data from the Australian Bureau of Statistics on building work

 -4.9% q/q ... a big miss
  • expected -1.6%
  • prior -3.7%
 

AUD/USD forecast for the week of November 28, 2016


The Australian dollar rally during the we, but the market looks as if it is going to see resistance above, and waiting to see whether the 0.75 level offers that in the sense and forms an exhaustive candle. That of course is a nice selling opportunity but it will probably come off the daily chart more than anything else. Even if we break above there, I think there’s a lot of noise higher that will continue to cause problems. Keep in mind that the gold markets falling apart, and that will continue to be very negative for this market.


 

ANZ Roy Morgan weekly consumer confidence index 115.4 vs. 115.5 last week


Report released from Sydney for the week ending November 27, 2016.

  • Consumer confidence 115.4 (-0.1%)
  • Four week MA 116.7 (+0.3%)
  • Financial situation, year ago 110.7 (-1.5%)
  • Financial situation, year ahead 125.6 (-0.9%)
  • Economy one year ahead 101.0 (+0.7%)
  • Economy five years ahead 108.4 (+3.1%)
  • Time, Buy Major household items (131.3 (-1.2%)
  • 2 year inflation expectations 4.2%
 

Australian Building Approvals for October: -12.6% m/m ( expected +2.0%, prior -8.7%)


Australian Building Approvals

October data:
-12.6% m/m HUGE MISS
  • expected +2.0%, prior -9.3%, revised from  -8.7%
-24.9% y/y HUGE MISS
expected -6.2% y/y, prior -6.4%
 

AUD: 2 ways to short. Morgan Stanley


Australia's current account deficit position makes AUD vulnerable to global rates and risk sentiment

Morgan Stanley is out with a Global FX strategy that is bearish on the AUD.  
They cite concerns about building approvals  which fell at their fastest pace since Lehman crisis in 2008  (-12.6% month on month and -24.9% year on year).  Their economists expect the Australian housing market to slow  in 2017, prompting the RBA to cut rates. Meanwhile the market  is not pricing in a cut in fact  in 2017, the market has priced in a seven basis point hike (see chart below).  They argue that this needs to be priced out and when it does, the AUD will fall. 



They like two trades to take advantage of this projection:
  1. Sell AUDNZD
  2. Sell AUDCAD
Here is what they say for both those trades.

AUDNZD - China slowing demand for iron ore/Increased demand for dairy.


For a trade into year-end we suggest selling AUDNZD driven by terms of trade differentials.

in general, when analyzing commodity currencies it's hard to stay away from monitoring data from China. Yesterday we learned that the Chinese authorities were going to restrict mortgage lending further by raising deposit requirements.  With the aim of reducing  the bubble in the housing market and combined with already announced measures that limit borrowing from construction companies, there is now a risk of slowdown in China's iron ore and steel requirements.  That sets AUD of for another bout of weakness as iron ore prices have again failed to surpass $80.  In contrast, the Chinese demand for dairy products continues to boom, helping whole milk powder prices rise 15% November.. The upcoming Fonterra auctions are expected to be strong a reduced supply after the New Zealand earthquakes.    Sell AUDNZD

AUDCAD - US growth spillover

The second trade, which could work for the whole of 2017, which plays on the growth potential differential between the US and China, is to sell AUDCAD.

We don't expect the bank Canada to cut rates in 2017 as inflation and growth have stabilized.  In fact the economy may even see support from fiscal stimulus in the US.  The bar for the Bank of Canada easing appears very low now as a Bank of Canada's own fourth-quarter GDP forecast has been revised down to 1.5% and Gov. Poloz  said recently that an oil price shock will be required to depart from its current outlook (which we interpreted as oil prices heading back to and staying in the $30 handle).  

MS maintains a short AUDNZD in its strategic portfolio and promotes selling AUDCAD in is top 10 trades for 2017.

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