Despite robust commodities prices, the Credit Suisse research team remains neutral on the Australian dollar due to slow vaccine implementation and persistent policy resistance to market pressure.
“We are neutral on the AUD/USD, with a target range of 0.7350-0.7730. (prev. 0.7415-0.7730). Despite unquestionably solid local economic performance so far, Australia’s stringent covid management offers an asymmetrically constrained upside risk profile for AUD vs other G10 FX.”
“Australia will remain exposed to the prospect of future lockdowns in Q3 because to the poor rate of vaccination and the zero tolerance stance to covid infections.”
“If price hikes do not resume, the recent stabilization in iron ore prices signals less potential for further improvements in the supporting balance of payments picture.”
“Wage and inflation growth are still substantially below target. As long as this is the case, the RBA will be cautious, and markets will be hesitant to price in the potential of a faster reduction in policy support ahead of and/or independently of the Fed. This puts the Australian dollar at a disadvantage against currencies whose hawkish policy moves are more openly acknowledged. This may change, but it will very certainly necessitate a significant shift in salary and CPI data.”/n
