In the Australian press today: Anxiety that a Tweet-trigger happy US President-elect Donald Trump could spark a trade war at any moment will keep the Australian dollar below 75¢ versus the US dollar, say Westpac currency strategists.
That link is to the full piece in the Australian Financial Review
Reporting on a note from WPAC's Robert Rennie:
- An inward-looking US administration
- Agonising in Britain over Brexit
- A series of elections in Europe
- A major Party Congress in China
- Further risks around Russia's position in the Middle East
- North Korea's nuclear ambitions
- "Then overlay a keen sense that we may be just one tweet away from a China/US trade spat, and we would argue that strength in the A$ should be strongly capped by 74.5/75.0 [¢ against the US dollar]."
ps. I should add, some of the AUD supportive points made by Rennie in the note (this direct from Rennie's note):
- A$ looking increasingly 'cheap' on a range of crosses to us even after a rebound in the last few days.
- We see three reasons to support our less downbeat view. It is cheap on a range of fitted fair value models; the beneficial commodity story is underpriced and global/ Asian growth accelerated into the end of 2016.
- However, as we move through 2017, this positive story will fade. The bigger risk appears to be the global geopolitical recession or near vacuum that we may face in 2017. There is a keen sense in the market that we are just one tweet away from another tumble.
- Thus even if we are correct, and the A$ is cheap, gains will be strongly capped by 0.7450/0.75.
