Via a note from Credit Suisse on the Australian dollar, a pretty small downside revision.
CS citing (in summary):
- Australia’s draconian covid management creates an asymmetrically limited upside risk profile for AUD vs other G10 FX, despite undeniably strong local economic performance so far
- still slow pace of vaccination and the zero tolerance approach towards covid infections suggests that Australia will remain exposed to the possibility of further lockdowns in Q3
- recent stabilization in iron ore prices also suggests less potential for further improvements in the supportive balance of payments picture, if price increases do not resume
- Wage growth and inflation remain well below target. As long as that remains the case, the RBA is likely to remain cautious, and markets will be unwilling to price in the possibility of a faster reduction in policy stimulus ahead and/or independently of the Fed
Thus, say CS, for the AUD:
- This puts AUD at a disadvantage compared to currencies where hawkish policy shifts are more actively discussed. This can change, but likely requires a clear shift in wage and CPI data
As an aside I can’t help but think that if the downside range limit projected is 0.7350 and the upside 0.7730 then the risk is up?