Via Westpac, their latest Australian dollar outlook:
- The Russia-driven supply squeeze should keep a floor under energy prices, strengthening Australia’s already large trade surpluses.
- But Aussie rallies should be capped against a US dollar backed by the Fed’s determination to remain aggressive on rate hikes until there is compelling evidence of core inflation rolling over.
- With global risk appetite still fragile and markets reluctant to price in a sharp recovery in Chinese growth just yet, the A$ in coming weeks seems likely to falter back to the 0.68-0.69 area, albeit avoiding the July lows sub-0.67. Into early Q4, scope for 0.71 as markets price a tapering in Fed tightening pace.
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Chart update:
