AUD: Risks skewed to the downside in short to medium-term - NAB

In its latest research note, the analysts at National Australia Bank (NAB) left the forecasts unchanged on the Australian dollar, although highlighted key risks to the near and medium-term outlooks.

Key Quotes:

“AUD within a cent of our 0.75 end-2017 forecast

Forecasts unchanged (AUD/USD ending Q3 2017 at 0.78, at 0.75 at the end of this year and to a low of 0.73 in 2018), but AUD/USD seen moving into 0.70-0.75 bucket one side or other of year-end 

We are flagging a downside skew of risks to both our short and medium-term numbers, for which we'd note the following:

1. The risk of US rates rising above Australian equivalents next year is rising. In fact, it now looks inevitable

2. The use of AUD as a trading proxy for Emerging Market risk - as well as hard commodity prices - is very much in evidence.

3. Speculative positioning in AUD remains quite long judging from latest CFTC/IMM data, albeit back from its post-early 2013 highs in late September.

4. In contrast to the tight relationship between the AUD and the broader USD movement in the past year or so in particular, AUD/USD has been falling at the same time that USD indices have been falling.”