The AUD/USD Pair Is Into Bearish Mood | The Future Decline In The NZD/USD Pair Is Expected
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USD/CAD
Current spot: 1.3722
• We haven’t changed our view that the loonie should emerge as a key outperformer once sentiment stabilises, thanks to low exposure to Europe and China, the positive impact from high energy prices and a hawkish Bank of Canada (which recently reiterated its commitment to fighting inflation despite economic pain).
• Still, CAD’s high beta and USD strength will keep USD/CAD in the 1.35/1.40 region into the new year, in our view, regardless of the BoC matching the Fed’s tightening.
• The recent output cuts by OPEC+ are surely a good sign for oilsensitive currencies, and may somewhat limit the downside risks for CAD even if risk assets remain weak.
AUD/USD
Current spot: 0.6323
• We remain bearish on AUD/USD into year-end, as risk sentiment fragility, China’s economic (and currency) woes and a strong USD all point to continuous weakness in the pair.
• We currently forecast a bottom of about 0.60-0.61 around yearend before a rebound that should accelerate in the second half of 2023. A break below 0.60 this year is entirely possible though.
• The Reserve Bank of Australia surprised on the dovish side in October as it delivered a “small” 25bp hike. Indeed, policymakers in Australia have greater flexibility given policy meetings are scheduled for each month; but our base case is that 25bp increases will become the norm. The FX implications, for now, should remain quite secondary.
NZD/USD
Current spot: 0.5603
• The Reserve Bank of New Zealand has steered away from any dovish signals as it hiked by another 50bp in October and signalled more tightening is on the way. Another 50bp increase is largely expected at the November meeting.
• As with the Australian dollar – and many other developed currencies – the role of monetary policy remains secondary compared to global risk dynamics.
• NZD/USD is looking at the 0.50 2009 lows as the next key support: that would be a 12% drop from the current levels and seems too stretched in our view. However, a move to the 0.52-0.53 area cannot be excluded should risk assets fall further.
This article is a part of a report by ING Economics available here.
Disclaimer
This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more
