NAB: Now Seen Above $0.70 In Q1; $0.75-0.80 In H2 2023

NAB note that “AUD/USD has spent some time above $0.70 already this year, aided by a weaker USD and big CNY gains, the latter as markets moved to price in a quicker China growth rebound from the end of its zero covid strategy.”

• “We expect the implied loss of U.S. global growth leadership to persist.”
• “This together with recent downside surprises on inflation and average hourly earnings data, maintains market confidence the Fed can be cutting rates before 2023 is out (still contrary to the Fed’s own public rhetoric).”
• “AUD/USD is seen spending much of H123 above $0.70, with our end–Q1 forecast revised to $0.71 from $0.70 and end-Q2 to $0.74 from $0.72.”
• “AUD is now seen moving into a $0.75-0.80 range in H223 (end-2023 forecast of $0.78 but which allows for a breach of 0.80 at some point).”
• “Any significant deterioration in risk sentiment represents a downside risk to AUD and one source of volatility. The RBA meanwhile only promises to be a major influence on the currency if it delivers something other than two more 25bp rate hikes in this cycle, pausing thereafter (which is NAB’s call).”