By eFXdata — Jan 30 - 04:30 PM
Synopsis:
BNPP expects AUD to outperform G10 commodity peers, supported by resilient labor markets, sticky core inflation, and a less dovish RBA. Tariff risks remain limited for Australia, and AUD remains undervalued. BNPP targets AUD/NZD at 1.11 by year-end, as RBA-RBNZ divergence keeps upward pressure on the cross.
Key Points:
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Australia’s Strong Domestic Fundamentals:
- Resilient labor market and sticky core inflation should keep the RBA relatively hawkish.
- Minimal impact from US tariffs – expected to shave only 0.2-0.3% off GDP.
- AUD remains undervalued, with BNPP’s CLEERTM fair value model at 0.71.
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AUD/NZD Outlook:
- RBA-RBNZ divergence favors AUD, as the RBNZ is set to ease aggressively after the most intense hiking cycle in G10.
- Upward pressure on AUD/NZD remains, but the pair is likely to trade within a tight range due to similar beta exposure to global macro factors.
- Target: 1.11 by year-end.
Conclusion:
BNPP remains constructive on AUD, expecting it to outperform G10 commodity peers on domestic resilience and relative RBA hawkishness. They maintain an AUD/NZD target of 1.11, supported by RBA-RBNZ policy divergence but see limited near-term upside given global risk factors.
Source:
BNP Paribas Research/Market Commentary