Goldman: Aussie dollar to rise

I hate agreeing with Goldman, especially on Australia, where it has been horribly wrong for years (being far too bullish). To be honest, the cross-over with mine and the GS view is minimal. The RBA is going to cut. And that will pressure the AUD.

But I do agree that the AUD has a good tailwind in a Chinese rebound, and that same firming of growth in H2 should lift Europe and the EUR (which will weigh on DXY), so I recognise that that lifts the prospect of an AUD rebound in the short term, especially so given how short markets are both EUR and AUD.

If so, this is a tradable rally and nothing more. It does not alter my view that the big move ahead is still down for AUD longer term, much further down, as China’s structural issues grind it to an inexorable halt.

Comments

  1. China’s underlying issues will probably take 5+ years before they become actual problems of the kind that would seriously dent Aus commodities. In that kind of longer term the AUD would be toast.

    • Too long. The problems are already obvious. Chinese iron ore imports are already falling and these can kicks are fast losing impact. Iron ore will be below $50 permanently well before five years.

    • – Car sales in China fell for the first time in (at least) 30 years. and that will put a MAJOR dent in australian iron ore exports.
      – The chinese government isn’t able to solve the credit crunch at the Household level (think: collapse of the peer-to-peer lending system). No, china has finally turned the (credit) corner.

  2. If the Aussie is about to launch, as Goldman and Deutsche among others think, then I’d like to see answers to two questions:
    1) Why are base metals prices – basically everything except iron ore – falling (ally, zinc, copper, nickel, lead all down month to date) and precious metals also softening (look at Silver),
    2) We broke the 200-Day MA last week and … nothing. I was worried the market might have lazy shorts on that would get stopped out and/or we might see technical model buying amid improving optimism but… nada.

    The price action in metals suggests this boost is temporary. Volatility is super low and stocks are running out of oomph and the technical picture suggests the market is NOT short Aussie (at least not much) and sentiment is becoming more bullish.

    I don’t see it myself. I think A$ TWI has strengthened more than enough. Commodities looking mixed here, volatility can only go up. rBA to cut and the US$ to remain solid.

    So where’s the A$ bull case?

  3. proofreadersMEMBER

    The perfect excuse excuse for the RBA “prayer group” to give it up the anus to savers with another cash rate cut?