Societe Generale Research discusses AUD outlook and sees a scope for further gains against NZD in the near-term, and against the EUR in the medium-term.
“From here, the Chinese improvement leaves me thinking that oil prices will hold up and sentiment about the Australian dollar is still too bearish. We will plug on with shorts in USD/NOK for the first thought, and shorts in EUR/AUD for the second,” SocGen notes.
“As well as strong Chinese data, we saw a weak New Zealand CPI release (1.5% y/y vs 1.9% last and 1.7% expected). That saw the NZD fall and gave AUD/NZD a big push higher. The bounce from 1.03 a month ago has been brutal, though in the last 5 years, AUD/NZD has traded in a 1.02-1.14 range, averaging 1.08, so there is still room to rise, especially if you glance at relative bond yields. Strategically, we like sort EUR/AUD. Both EUR and AUD benefit from a Chinese pick-up, but only the euro is vulnerable to a US/European trade dispute,” SocGen argues.