CIBC Research adopts a cautious bias on AUD around current levels. CIBC targets AUD/USD around 0.65 in Q3.
"Despite the ‘feel good’ tone for the AUD, there are headwinds looming. For one, the current spat with China (Australia’s most important trading partner) over barley, meat and suspicion with respect to messaging over COVID19, could threaten inward investment from China at the margin. Additionally, prior yield advantages are no longer there, and the AUD is expected to benefit far less from speculative flows relative to the past," CIBC notes.
"Finally, trends toward de-globalization will naturally harm commodity proxies in the currency markets – including the AUD. An earlier than anticipated dose of optimism has forced us to revise our AUD and NZD forecasts higher. As that confidence is tested, we see a stable environment for the AUD this year," CIBC adds.