Sean Callow, research analyst at Westpac, notes that the AUD/USD has barely changed in recent days, hovering around 072, which seems consistent with the strong opposing forces in play.
Key Quotes
“On the positive side, the US dollar has lost a lot of yield support and the FOMC’s likely “dovish hike” should be the theme into early 2019.”
“Also helping AUD (on various crosses) is the lack of traction for the notion of RBA easing in 2019.”
“Capping AUD rallies though are ongoing trade tensions between the US and China, now spilling into courtroom dramas in Canada. The tone of US-China commentary ahead of the 1 March deadline will fluctuate and add to the headwinds for global equities and risk-sensitive currencies.”
“Looking beyond the turn of the year, we see a declining path for AUD/USD, with the Fed delivering a lot more tightening than is currently priced and pressure on key commodity prices.”
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