NAB: Model Suggests AUD/USD Is Fundamentally Undervalued

NAB note that “while the AUD/USD lost altitude during June, the currency’s fair value model estimate edged a little bit higher to $0.7540, resulting in a widening of the model’s residual to just above 6c and suggesting the AUD/USD is fundamentally undervalued, the residual ending the month well outside its fair value range. A widening in nominal AU/U.S. yield spreads during June lifted the model estimate. A decline in commodity prices was a small detraction with a bigger pullback - but not a fully offsetting force to the rates factor - coming from a deterioration in risk appetite.”