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.