AUD/USD around 0.86 in 12m view – Rabobank

FXStreet (Edinburgh) - Senior Currency Strategist Jane Foley at Rabobank expects the pair to range bound between 0.92 and 0.93 in the short term and to slip towards 0.86 in 12m.

Key Quotes

“Over the past year or so, one of the greatest fears regarding the outlook for the Australia economy has related to concerns over a lack of alternative investment spending (in anything other than residential property)”.

“Although a number of labour market indicators have picked-up since the start of this year, the weakness in capital expenditure has suggested that future employment growth could be weak”.

“Last week, however, official data showed that Q2 capital expenditure grew a better than expected 1.1% q/q, suggesting that Australia is finally managing to re-invent itself following the end of the mining investment boom. This piece of data will certainly have fed the AUD’s current resilient tone”.

“Looking forward we expect that soft economic data releases will wear down the current resilient tone of the AUD”.

“While the official Capex data should bolster the mood of the policy makers, it is clear that headwinds still cloud the outlook and this suggests risk that the RBA could again attempt to jawbone the AUD to lower levels”.

“Over the coming 3 mth we expect the AUD/USD 0.92 to 0.93 to contain most activity. On a 12 mth view, we look for a move towards 0.86. This assumes a broad based recovery for the USD as the first hike in the Fed funds rate near”.