Synopsis:
Despite the Australian dollar's drop after the RBA’s dovish 25bp rate cut and lowered growth forecasts, HSBC maintains a bullish AUD/USD outlook, citing macro and flow-related tailwinds that could lift the currency in the medium term.
Key Points:
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Fiscal Cushion:
The Australian government retains ample fiscal space and willingness to deploy supportive stimulus if domestic conditions weaken. -
Trade Tension Relief:
The recent de-escalation in global trade tensions, particularly US-China, bodes well for Asia-Pacific growth and global risk sentiment—both positive for AUD. -
Rising Hedge Ratios:
With lower FX hedging costs, Australian superannuation funds may boost hedges on foreign equity holdings, leading to AUD inflows. -
Positioning and Valuation:
CFTC data shows AUD remains a crowded short, while HSBC’s models suggest the currency screens cheap, creating favorable risk-reward for a rebound.
Conclusion:
While the RBA’s dovish stance weighs near-term, HSBC sees structural and positioning dynamics that favor AUD/USD upside—especially as risk appetite improves and fiscal/portfolio flows turn supportive.
