Exchange range outlook: US dollar is Neutral, Australian dollar should test 1.035 suggests Westpac

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Category: Australian Dollar News

Written by Sam Coventry

International Money Transfers at our sister site

On the fundamental front we see the value of Australia’s monthly exports to China hit a record high in May, suggesting fears of an imminent China hard landing are misplaced.

This morning we see exchange rate markets put in a rather flat performance; but this is entirely understandable considering the Bank of England and the European Central Bank are due to announce their latest policy initiatives.

A look at the spot rates shows the pound Australian dollar exchange rate unchanged at 1.5162. The US dollar to Australian dollar rate is also unchanged at 1.0273. (For the latest investment bank fx forecasts please use this Facebook entry path to gain access to our IMT site and receive updates).


But the outlook for the Australian dollar (Currency:AUD) against its US counterpart is one of near-term strength.

In a morning note to clients Westpac say:

"AUD/USD should test 1.0350 before it becomes particularly prone to reversal, though overall trading ranges have risen as the RBA finds reason to pause in its easing cycle. NZD/USD should also probe a little higher before slipping back somewhat."

The US dollar outlook is neutral. The same note goes on to say:

"Should we see the improved payrolls report our economists expect, Fed QE talk should recede again. But payrolls are of course always prone to surprise; we turn neutral Dollar Index on the week.

On the fundamental front we see the value of Australia’s monthly exports to China hit a record high in May, suggesting fears of an imminent China hard landing are misplaced.

The trade balance more generally stayed in deficit territory (for a fifth month in a row), but the deficit was narrower than expected at only A$285 bn (cons. A$500 bn).

As mentioned though, the focus for currencies will rest with the policy decision today and economic data releases due tomorrow.

A check of the strongest G10 currencies over the past week shows AUD, SEK, CAD and NZD to be the biggest beneficiaries after EU leaders managed to exceed very low expectations.

Sean Callow at Westpac says:

"EUR/USD is clinging to a 0.7% gain at time of writing, which in itself is not cause for concern among European policymakers who would not be at all fazed by a weaker euro.

"But it does indicate the skepticism that has - almost inevitably - emerged after the initial flurry of headlines."