NAB raises Australian dollar forecasts

Seems reasonable to me:

  • Having held our nerve through the first seven months of 2017 with our long-standing call for the AUD/USD to fall to 70 cents by the end of this year, the ever-diminishing prospects for a significant near-term recovery in the US dollar now forces us to acknowledge that it is now difficult to expect such a steep fall this year.
  • Next year could still be a very different story, in particular if US rates move up above Australian equivalents, which is the NAB forecast.
  • But for end Q3, we lift our forecast from 0.73 to 0.78, and for year-end from 0.70 to 0.75.
  • In 2018, we now suggest a low of around 0.73, from 0.70 previously

I still see the risk of one more spike higher as the Fed disappoints hawks owing to the oil shock hitting inflation and as the tail end of the Chinese stimulus whips through markets.

Comments

  1. the AUD needs to spend a sustained period below 60 cents to fix the economy.

    1. it will drive inflation as we import most consumables.
    2. inflation is needed to help people get wage increases to combat mega mortgages. A GST is also a good way to get nominal inflation – another 10% GST may actually help housing affordability (believe it or not).
    3. It helps our remaining productive industries.
    4. Boosts tourism.
    5. Makes our property still seem cheap to overseas investors.

    A sustained (4-5 year) low AUD (60cents or under) is the only way out of this mess.

    • Agree with you.

      That said, I think we’ll see AUD at .85 by year end against the USD.

      I would prefer the AUD to be at .60 as you say Raglan.

      But, my wish has not come true for years and years now… AUD will be played higher till year end.

      TM.

    • Raglan
      The currency in the top 5 economies in the world are higher than the AUD$. The USA, China (pegged to $US ) Germany, Japan and the UK.

      Lower AUD$ will mean cheaper housing, minerals for the rich economies and do nothing for OZ. We will become a cheaper and poorer country…….full stop. The house you wanted to buy for 800k is now worth only 600 to the O/S investor who will still lock it up for future use, or sale should the AUD peso go much higher. Only a lose/lose for Australians.

      The export industries will boom; what export industries ? they have all closed and moved to China, Indonesia or Malaysia.

      Remember the great Japanese tourism trade of the 1980’s. Not so great for the OZ economy as the tourists flew here on Nippon Airways, stayed at the Nippon Hotel in Surfers and shopped at the desired Japanese owned shops for hats, opals etc.

      The money spent here filtered back to Japan as it does now with the Chinese tourists.

      Go to the UK for a vacation and see how that economy is booming, even after Brexit……..have just returned from there.

      Ah yes and the UK to AUD is approx. 0.60 go figure.

      Stop reading the BS books and get out and see for yourself.

  2. There was a great interview on MacroVoices (https://www.macrovoices.com/292-raoul-pal-julian-brigden-when-will-the-us-dollar-route-end) where both Raoul Pal and the Julian Brigden agreed that all of the data coming out now is very similar to the late 1990s when comparing everything from PMIs to debt to stock markets…. Julian said the data is also similar to the late 1980s and the next crisis is coming soon and will come from a position of strength rather than weakness. He mentions where commods (oil) tripled in the late 90s and doubled in the late 80s forcing inflation up and rates followed higher. Rates going higher popped bubbles…

    With Australian Terms of trade on a tear, steel PMIs strong, China beating growth forecasts, falling USD, this could happen. Oil would have to go higher in my opinion – like $60-$70 and inflation could really be there forcing central banks to continue to tighten including the RBA. Former RBA board members already beating the drum for 8 hikes over the next 2 years and Costello coming out recently calling for rate hikes.

    Caught me by surprise, but maybe the world will get more higher commod prices, more inflation and more rate hikes. This could be one way the Australian housing bubble finally ends.