AUD: Commodities drive revision - Westpac
|Analysts at Westpac continue to expect that growth in China will slow modestly in 2H17 then more meaningfully in 2018 as credit conditions are tightened and central government infrastructure programs wound back and as a result expect the Australian dollar to end the year at USD0.76.
Key Quotes
“In retrospect, our expectations for the extent of the reversal in commodity prices were overdone, with the expected falls in 2018 in line with those seen in 2015 – when the authorities took a particularly hard line against corruption and debt fuelled excess.”
“Our Australian commodities index is now expected to fall by only 7% to end 2017. As a result, we now expect the Australian dollar to end the year at USD0.76, previously USD0.73.”
“For 2018, we had previously anticipated a 30% decline in commodity prices. But as 2018 will not see as broad or large a decline in activity, we now expect around a 20% fall in commodity prices. Other key factors behind our AUD forecast remain unchanged, save the fed funds rate profile being pushed out three months: to December 2017, then June and December 2018.”
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