By eFXdata — Sep 30 - 08:46 AM
Synopsis:
Goldman Sachs indicates that recent fiscal stimulus in China has provided a temporary boost to the Australian dollar (AUD), but this impact is expected to be tactical rather than sustainable.
Key Points:
- The AUD has recently outperformed, buoyed by improved sentiment in Chinese equities following monetary and fiscal stimulus announcements.
- Continued improvement in sentiment may lead to further AUD outperformance in the short term.
- However, Goldman Sachs' China economists anticipate limited upside risk to growth forecasts, suggesting that the stimulus will not lead to a long-lasting positive impact on the AUD.
- Additionally, while the recent rally in iron ore prices has supported the AUD through favorable terms of trade, commodity strategists foresee downward pressure on prices resuming in Q4.
Conclusion:
The current fiscal stimulus and iron ore rally may temporarily bolster the AUD, but Goldman Sachs cautions that these factors are unlikely to drive sustained strength in the currency in the longer term.
Source:
Goldman Sachs Research/Market Commentary