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Analysts at Citibank argue that “much of the good news appears discounted” in currencies from the commodity bloc. They forecast the AUD/USD pair at 0.72 for the third quarter and at 0.73 in the fourth quarter. 

Key Quotes:

“A lot of upside drivers for AUD and NZD (advanced COVID-19 containment, reopening economy and sizeable government and central bank support) seems discounted. This makes both AUD and NZD vulnerable to renewed bouts of risk aversion should US-China and AustraliaChina tensions escalate. Taking a longer term view, the prospect of the RBA keeping its current ultra-low policy rates for an extended period and Reserve Bank of New Zealand potentially entertaining negative rates means further extensions of recent gains look unlikely.”

“There seems to be a lot of oil-related bearishness priced into CAD and the trade weighted CAD looks to have found support around the lows of the last oil price collapse. At the same time however, Citi analysts’ forecast for a significant rebound in 3Q to pre COVID-19 levels is contingent on a sharper economic recovery. Meanwhile, Canadian domestic fundamentals are in a similar place to Australia and while the fiscal / monetary policy response has been robust, as with AUD and NZD, much of this “good news” now appears well discounted into the currency. “