AUD/USD is trading in range for a long time. Is it time to sell the pair? The team at Deutsche Bank discusses:
Here is their view, courtesy of eFXnews:
We expect that softening wage pressure in a deteriorating labour market will force the RBA to cut the target rate at least once in the first half of next year, contrary to market pricing.
The rate spread against the US is likely to tighten further from the US side and put pressure on bond inflows, on which Australia depends to finance its large and persistent current account deficit.
We are skeptical that the recent rally in commodity prices can sustainably lift the trade balance into surplus, as the speculative bubble in bulk commodities and base metals appears out of kilter with fundamentals. In addition to industry fundamentals, global macro risks such as continued Chinese devaluation and looming trade conflicts exacerbate the downside risk.
Our valuation models remain consistent with a significantly weaker AUD, which is currently the most overvalued currency in the world bar the RMB and CHF
DB targets AUD/USD at 0.69, 0.67, 0.65, and 0.63 by the end of Q1, Q2, Q3, and Q4 respectively.Â
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