Synopsis:

Goldman Sachs has revised its AUD/USD and NZD/USD forecasts higher after the post-tariff rebound and improving global risk sentiment. While short-term relief is expected to continue, growth headwinds are likely to cap gains over the medium term.

Key Points:

• AUD & NZD Rebound from April Lows:

  • Both currencies were heavily impacted by the early-April trade shocks, given their high sensitivity to global risk and trade flows.

  • The AUD has been the most volatile G10 currency over the past 3 months.

• Forecast Upgrades:

  • AUD/USD revised up to 0.66 for the 3-, 6-, and 12-month horizons (from 0.60 previously).

  • NZD/USD revised up to 0.61 over the same timeframes (from 0.56).

• Drivers of the Upgrade:

  • Easing US-China trade tensions and better risk sentiment have created a more supportive environment.

  • Expectation of continued short-term relief in both currencies, especially if US soft data improves.

• Medium-Term Limitations:

  • Structural concerns remain, including cyclical growth challenges and persistent downside risks, which should limit sustained upside.

Conclusion:

Goldman Sachs acknowledges the recent bounce in AUD and NZD amid improving global conditions, but maintains a cautious medium-term outlook, expecting both to stabilize modestly higher while remaining vulnerable to global growth risks.