Headlines about trade have been dominating the news for a long time. This has a significant impact on the Australian and New Zealand Dollars. What’s next?
Here is their view, courtesy of eFXdata:
NAB Research discusses AUD and NZD outlook and makes a case for 2-way risks amid the ongoing global trade wars tensions.
“We’ve become more nervous about the outlook for the NZD and AUD. Our working assumption made at the beginning of the year of no major impact from trade wars is becoming increasingly challenged,” NAB notes.
“The NZD and AUD both currently trade below our short-term fair value estimates (6% and 2% below respectively), suggesting growing discounts reflecting the more uncertain outlook. We’d expect to see another lurch down in these currencies on any fresh tariffs on the scale proposed. Stress-testing our models, a move sub-0.65 for the NZD and sub-0.70 for the AUD couldn’t be ruled out in that event,” NAB argues.
“On the other hand, a de-escalation of trade tensions could see modest recoveries in both currencies. The outlook has become binary,” NAB adds.
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