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28 Dec 2015
Reality check for commodity bloc: NZD, CAD and AUD – ING
FXStreet (Delhi) – Viraj Patel Foreign Exchange Strategist at ING, suggests that while 2015 has been a difficult year for commodities, and hence dollar bloc currencies, we believe the turn of the year is unlikely to bring about a change of fortune for AUD, NZD or CAD.
Key Quotes
“In particular, the following three headwinds will likely see the downward trend continue over 1H16: (1) China’s ongoing rebalancing away from investment-led growth and its stifling effect on any commodity-led FX rebound; (2) a more acute Fed tightening cycle than currently anticipated by markets; and (3) the limited capacity of local central banks to aggressively lower policy rates due to financial stability concerns.”
“For CAD and NZD these headwinds may prove to be transitory; we foresee a turnaround in their profiles in 2H16 due to a rebound in economic prospects, valuation constraints and a more favourable outlook for their key commodity exports. In contrast, we think AUD will be the worst-performing currency overall next year; the bearish domestic outlook and relative lack of adjustment over the course of the commodity price downcycle warrants further sustained weakness. We think a decline in AUD/USD to 0.65 is achievable.”
Key Quotes
“In particular, the following three headwinds will likely see the downward trend continue over 1H16: (1) China’s ongoing rebalancing away from investment-led growth and its stifling effect on any commodity-led FX rebound; (2) a more acute Fed tightening cycle than currently anticipated by markets; and (3) the limited capacity of local central banks to aggressively lower policy rates due to financial stability concerns.”
“For CAD and NZD these headwinds may prove to be transitory; we foresee a turnaround in their profiles in 2H16 due to a rebound in economic prospects, valuation constraints and a more favourable outlook for their key commodity exports. In contrast, we think AUD will be the worst-performing currency overall next year; the bearish domestic outlook and relative lack of adjustment over the course of the commodity price downcycle warrants further sustained weakness. We think a decline in AUD/USD to 0.65 is achievable.”