ANZ "continue to think that the big..........>

AUSSIE: ANZ "continue to think that the big picture outlook for the AUD is a

negative one. First, it has no yield support and higher US rates, due to a

relentlessly hawkish Fed, will keep weighing on the currency. According to our

fair value model based exclusively on the rate spreads, the AUD should be

trading below USD0.70. Second, the commodity side, which used to be the bright

spot for the AUD, is rapidly deteriorating on the back of the trade war

narrative. And even though we expect some stabilisation on this front, that

won't likely be a panacea for the AUD. Third, we think tighter liquidity

conditions on the back of a hawkish Fed mean volatility is set to pick up and

global growth should slow towards trend by the end of this year. This is

important as growth is a key determinant of AUD performance, where a weaker

growth outlook is usually associated with a large probability of the AUD

falling. Finally, while China's new fiscal stimulus may help growth to stabilise

in H2 2018, further downside risks in the AUD may still be on the cards. We

continue to see the AUD falling to 0.70 by year end, with risks skewed to the

downside."