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14 May 2013
Forex Flash: Australia strategy profile – Westpac
FXstreet.com (Barcelona) - Broad USD strength has been punishing AUD more than most, just as the opposite usually holds true. Stronger local data calls into question when the RBA will cut again, helping limit AUD/USD downside. However, “the cleanout could easily extend to 0.9850/70 near term before bouncing back above 1.00 on stretched short positioning.” notes Global FX Strategist Sean Callow at Westpac.
In terms of Australian rates, regarding the AU outright, discussions around a premature end to the Fed QE program are having a profound impact on UST yields. As such our long-held bias towards buying AU bonds within their range is undergoing a challenge as it is unlikely that AU bonds will be able to rally against a bearish UST backdrop.
Finally, with the US curve exerting a steepening influence upon global curves, the AU 3-10yr curve can continue to steepen towards 65bp. “We would recommend, however, beginning to fade any move above 65bp in the 3-10yr curve.” Callow posits.
In terms of Australian rates, regarding the AU outright, discussions around a premature end to the Fed QE program are having a profound impact on UST yields. As such our long-held bias towards buying AU bonds within their range is undergoing a challenge as it is unlikely that AU bonds will be able to rally against a bearish UST backdrop.
Finally, with the US curve exerting a steepening influence upon global curves, the AU 3-10yr curve can continue to steepen towards 65bp. “We would recommend, however, beginning to fade any move above 65bp in the 3-10yr curve.” Callow posits.