DB note on the Australian dollar, with no politics not election mention at all.
The note is from prior to the election.
In brief, DB note:
- market fully pricing two cuts over the next year, the RBA is the most dovishly priced in G10 which we argue is excessive
- Australian nominal GDP is handily outperforming peers, the unemployment rate is at an eight-year low and the housing story looks past the worst.
- AUD will struggle in a risk-averse background
- we see it offering value against both CAD and NZD
On NZD:
- New Zealand we see downside risks to dairy prices and a persistently more dovish central bank
- the currency remains overvalued on our traditional valuation metrics
On CAD:
- we see additional downside risks to the data with further headwinds from delayed USMCA ratification
- With the risks to oil prices skewed to the upside but the CAD beta to oil very low, we also like buying USD/CAD calls contingent on higher oil prices.