© Reuters.
HSBC has maintained a bearish stance on the foreign money pair, citing its three-month underperformance. This comes because the Reserve Financial institution of Australia (RBA) governor Michele Bullock continues to maintain charges regular regardless of potential future financial tightening. The Australian greenback has depreciated in opposition to a sturdy US greenback amidst a unfavourable danger sentiment, making AUD/USD the weakest performer amongst G10 currencies this quarter.
HSBC’s pessimistic forecast is anchored on 4 key elements. Firstly, the diverging rates of interest between Australia and the US have performed a major function within the foreign money pair’s efficiency. Whereas Australia’s central financial institution has saved rates of interest regular, the US Federal Reserve has been hinting at potential fee hikes, making the US greenback extra enticing to traders.
Secondly, China’s stagnant actual property and commodities market have influenced the Australian greenback’s efficiency. As a significant buying and selling accomplice of Australia, any slowdown in China’s economic system might have a major affect on Australia’s foreign money.
Thirdly, the burgeoning yield and financial benefit of the US have contributed to the AUD/USD’s underperformance. The US economic system has been exhibiting indicators of sturdy restoration from the impacts of Covid-19, resulting in elevated investor confidence within the US greenback.
Lastly, Australian superfunds adjusting their hedging methods in anticipation of additional AUD depreciation have additionally affected the foreign money pair’s efficiency. These funds are making ready for potential losses from additional depreciation of the Australian greenback in opposition to the US greenback.
Based mostly on these dynamics, HSBC anticipates sustained bearish tendencies for AUD/USD. It stays to be seen how these elements will proceed to affect the foreign money pair’s efficiency within the coming months.
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