AUD: Struggle against a firm US dollar - Westpac

According to Sean Callow, Research Analyst at Westpac, the Aussie dollar’s 2.2% decline over the past week is very close to the falls in CAD and NZD, though there are of course domestic factors in play for each along with the struggle against a firm US dollar, the latter finding fresh yield support.

Key Quotes

“Australia’s sub-consensus Q3 CPI data was the key blow to AUD this week, including as it did indications of a lack of pricing power for many sectors competing for wary consumers – see chart across.”

“Markets still fully price an RBA hike by Nov 2018 and data releases in the month ahead shouldn’t change that much. But our AUD/USD fair value estimate is around 0.7650, so we can’t object to the spot decline to lows since July.”

“Spec long AUD positions are finally being reduced but still look to be a headwind. If global risk appetite largely holds up in the week ahead, AUD/USD should consolidate its decline and avoid a test of 0.7650.”