NAB: AUD/USD Continues Run Below “Fair Value”

NAB note that “October was a risk-positive month, but somewhat unusually AUD/USD failed to exhibit its traditional pro-risk attributes. Spot was little changed while our AUD/USD model estimate gained over half a cent with the model’s risk factor the largest positive contributor. Commodities also added to the model estimate with gains in oil more than offsetting weakness in gold and metal prices. In contrast, the model’s rates factor was a minor detraction. Extreme AUD/USD undervaluation relative to our model estimate has been a feature since early June this year. At the end of October AUD/USD was just over 4 cents undervalued, well outside the model’s fair value band of +2.5% to -3.5%.”