A recap of Westpac's call for the Australian dollar, they have reiterated the call in their outlook for June
In summary:
- US/Australian interest rate differentials and commodity prices remain key for valuation
- RBA rate cuts - three cuts priced by markets (through mid-2020, WPAC is calling for 3 this year, ie 2 more)
- US FOMC expectations showing cuts ahead, has stopped AUD from falling too hard. WPAC look for FOMC cuts in Sep and Dec)
- Also supportive for AUD are commodity prices - "If it were not for the above sustained strength in commodity prices, all else equal, the Australian dollar would be much lower"
- Direct investment flow in Australia waning … "in the three months to March 2019, the direct investment flow looks to have comet o a halt "
WPAC forecast AUD
- to 0.68 in H2 this year
- to 0.66 in 2020 H1
- 0.67 in H2 2020