Australian Markets Weekly – 5 December 2016

NAB economists continue to monitor recent disappointing momentum in indicators of the NSW economy, employment and – until Friday – also in retail sales.

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More AUD downside beckons

  • In today’s weekly, we update our AUD views – clients wishing to subscribe to either our Corporate FX Monthly (suitable for SMEs) or Global FX Strategist (suitable for institutional investors) publications, please email nab.markets.research@nab.com.au
  • Our broad scenario remains that further USD strength will see the AUD push lower across time down to at least 0.70. Any moves back to near 0.75 should be seen as attractive to importers; for exporters a move back to ~0.73 may be as good as it gets this year with a Fed rate rise on 14 December now fully discounted. A move into the mid 0.60s is possible if the RBA eases further and commodity price gains reverse.
  • The big move of last week was the sharp rise in oil prices as OPEC agreed to cut production. This should add further support to the RBA’s view that a reduced drag from the resources sector will see Australian economy strengthen over the next 18 months.
  • hat said, NAB economists continue to monitor recent disappointing momentum in indicators of the NSW economy, employment and – until Friday – also in retail sales. Q3 GDP on Wednesday is expected to print softly (-0.2% q/q) but we expect the RBA to look through this softness awaiting further clarification on the softness of non-mining.

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