AUD/USD to challenge the 0.7170 September low – Credit Suisse

Median GDP growth expectations have increased in reaction to Australia’s reopening plans, shielding the aussie performance from other risks. Looking ahead, economists at Credit Suisse see priced-in hawkish monetary policy expectations amid regional growth concerns as limiting scope for further AUD strength. AUD/USD is expected to re-test recent lows around 0.7170.

AUD looks unlikely to benefit from a commodities rally

“We see limited scope for AUD to continue to benefit from the lifting of existing stay-at-home orders. With iron ore prices 50% below this year’s peak, and Chinese growth risks in focus, current GDP expectations look vulnerable to a pullback, if the path to reopening is challenged. The timeline for international travel is also uncertain.”

“We view the market’s hawkish expectations as a hindrance for AUD, if economic data were to falter, or if reopening plans were to be postponed.”

“The crash in iron ore prices since July challenges the notion that AUD can strengthen because of its commodities exposure. Generalized strength in commodities is unlikely to be helpful for AUD.”

“We lowered our AUD/USD target range from 0.7100-0.7450 to 0.7050- 0.7400 for Q4: the already constructive growth and policy outlook priced in ahead of key reopening dates makes us view AUD as asymmetrically exposed to the downside in the near-term.” 

“Late Sep lows around 0.7170 are likely to be in focus.”