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Sep 20 - 02:55 PM

AUD/USD: Bearish N-Term But Expects A Gradual Recovery M-Term - Citi

By eFXdata  —  Sep 20 - 01:30 PM

Citi discusses its bias on AUD/USD over the near- and medium- term.

"We are bearish AUDUSD in the near-term, but expect a gradual recovery in the medium-term for the pair. AUDUSD will remain heavily driven by deteriorating external drivers in the short-term. Further downside to risk-assets (we think equity markets have yet to price in a recession from an earnings perspective, and risk sentiment is key for AUD performance," Citi notes. 

"AUD exhibits the second highest average historical beta to MXWO in G10), a Fed that will keep aggressively tightening, and pessimism around Chinese economy with further lockdowns and still lacklustre policy support for credit/ property markets, should see further AUD weakness. China feeds into AUD dynamics also through AUDUSD’s tight correlation with broader EM Asia FX, which our EM Strategists forecast to continue to weaken from challenges to growth, manufacturing and export performance," Citi adds. 

Source:
Citi Research/Market Commentary

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