Synopsis:

BofA sees long AUD/USD as the best G10 trade if China sentiment improves, but they are waiting for clarity on US tariffs before committing fully.

Key Points:

1️⃣ China Sentiment Needs Broader Recovery

• USD depreciation is unlikely without a stronger China-led growth recovery.
• The current equity rally in China does not fully reflect broader sentiment improvements.
• Upside risks to China sentiment could grow if the National People's Congress (NPC) delivers positive surprises.

2️⃣ Tariff Risk Premium in the USD Has Unwound

• The DXY remains strong, but much of the tariff premium has faded.
• Near-term USD support remains until the US trade investigations conclude (by April 1).

3️⃣ Why long AUD/USD is the Best Trade

• AUD is heavily tied to China’s economic recovery due to trade links.
• If China’s outlook improves, AUD/USD is best positioned to benefit.
• BofA is bullish medium-term, but waiting for clarity on US-China trade risks before acting.

Conclusion:

BofA sees long AUD/USD as the best G10 trade for a China recovery, but near-term caution remains due to lingering tariff risks and uncertain China sentiment. Clarity from the NPC and US trade policies will be key triggers