Analysts at Nordea say AUD/USD longs are their best trade for 2015.
I don’t care even care if Nordea is right, I’m just happy that someone is willing to step outside the consensus.
Nordea’s rationale behind this call:
• Rebalancing. Over the past 3 years imports have contracted with moderating consumption, while export contribution to GDP growth has increased. The current account has narrowed to just ‐3% now vs ‐7%/GDP in 2008.
• Labour market. While inflation has softened in line with global trends, capacity utilization has likely bottomed, credit has picked up, and most forward looking indicators suggest improvement in the labour market in 2015.
• Monetary policy. The market is pricing in most interest rate cuts from RBA among G10 currencies (40bps within 1Y), which they don’t believe will materialize.
• China housing. China, Australia’s key export destination, is set to recover: in particular the housing market will be cyclically helped by the policy easing and government measures over the past few quarters.
• Base metals. The base metals, in particular iron ore, which dropped last year, will likely positively respond to recovery in China’s housing market, thus boosting Australia’s terms of trade.
• Positioning. The market is extremely short commodity currencies, and AUD in particular.
To add to their case on metals, Alcoa was bullish on global aluminum demand yesterday. For more, check out eFX Plus.
