The G20 summit took place in Bali, Indonesia, on November 2022…
Major banks: bushfires are the main risk for the AUD
Information is not investment advice
It seems like everything is getting worse for Australia. Despite a small relief connected with the US-China phase one trade deal, the economy of a country is set under pressure. As a result, the major analytical banks downgrade their forecasts on the performance of the AUD in the first quarter of 2020. As bushfires continue to pull the domestic confidence down and hints on the rate cut by the RBA keep circulating, let’s see how Morgan Stanley and ANZ forecast the further direction of the AUD.
Blame the bushfires
Did you know about the bushfires in Australia? The record-breaking temperatures across the continent set the series of massive fires. According to economists, the fires in the Australian forests have already impacted the overall economic conditions, including employment levels, GDP, retail sales and consumer spending.
ANZ experts expect the decline in the number of jobs in December, as well as the negative GDP growth rate for the last quarter of 2019 and the first quarter of 2020, mentioning the fire crisis as a major risk. So, will we see a huge drop in employment levels after the surprising blast of 39.9 thousand jobs last time?
Employment change of Australia, quarterly
Sourced by: Tradingeconomics
The consumer confidence remains weak with 95.1 in December 2019. The survey shows that consumers prefer to save rather than spend, thus the household saving rate reached 4.8% in the third quarter of 2019, which is the highest level since 2017.
Consumer confidence of Australia, monthly
Sourced by: Tradingeconomics
Morgan Stanley agrees with the negative impact of bushfires, sending the Australian lower in the first quarter of 2020 on the softer domestic situation. It thinks the negative effect of fires on the GDP growth may even outperform the "Black Saturday" outcome, which killed 173 people in 2009.
Ready to cut
Following the negative economic data, both Morgan Stanley and ANZ forecast the Reserve bank of Australia to cut its interest rate during the upcoming meeting on February 4. This will be yet another headwind to the AUD.
While there is only the 50% chance of a rate cut priced into the market, Morgan Stanley is sure that it is underpriced. As a result, the Australian dollar may fall down after the announcement. The next focus of economists will be on the release of employment data on January 23. A strong job report may lower the possibility of a cut.
What’s with AUD/USD?
While the AUD/USD pair has got positive momentum on the risk-on environment, sticking above the 200-period SMA, analysts expect the limited optimism. So, the fall towards the 50-day SMA at 0.6865 may happen soon. After that, the next key level will lie at 0.68. If the pair reaches this level in the first quarter we may suggest the ANZ forecast for June 2020 to be correct. The bank sees the aussie at 0.66 in June 2020.
From the upside, AUD/USD is limited by 0.6930 with the following peak at 0.7.
The deafening news shocked the whole world yesterday: the British Queen Elizabeth II died peacefully at the age of 96…
After months of pressure from the White House, Saudi Arabia relented and agreed with other OPEC+ members to increase production.
Last year was tough for the Japanese yen. USDJPY gained more than 30% over 2022, striking above 150 in October. While anticipation of slower Fed rate hikes pulled the pair below the 130 level at the start of 2023, the speculations over the destiny of BOJ’s yield control policy grabbed the attention of the Japanese assets in the middle of January. What lies ahead for traders of the Japanese yen?
Today, at 5:00 pm (GMT +2), the Bank of Canada will publish the Overnight Rate, which represents short-term interest rates, and is pivotal to the overall pricing of the Canadian Dollar in the global markets. Let's look at how the markets are faring ahead of the BoC rates release.
In a call scheduled for January 25, 00:30 am GMT+2, Microsoft will publish the company's earnings for the final quarter of 2022 and comment on the results, projections, and outlook for the nearest future of the company.