From the FXWW Chatroom: Our Global Rates & Currencies research team note the sharp rally in AUD is unlikely to elicit much concern from the RBA yet & our model suggests the TWI is fairly valued. Meaningful misvaluation will re-emerge if terms of trade falls by over 5% & real interest rate differential narrows by 100bp. They have revised up our AUDUSD forecast expecting near-term resilience but followed by depreciation as China demand slows. In the near term, not much will stand in the way of appreciation; domestic data surprises are positive but not extreme, the external backdrop (particularly China import demand) has remained stronger for longer, and positioning metrics are not stretched. The break of 0.80 is likely to be sustained for now. Little reason for the RBA to be overly concerned at current lvl, “A bit lower” is always welcome, but the RBA is unlikely to revert to the more active verbal intervention.
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