Just a couple of early bank notes crossing, some comments on hwat is ahead for the ozznAustralian dollar
- AUD/USD will likely remain firm this week supported by encouraging Chinese economic activity (Tuesday) and favourable Australian employment conditions (Thursday) for April.
- Risk to AUD/USD are skewed to the downside because of the possibility for softer Australian wage growth in Q1 (Tuesday). In line with consensus CBA economists expect overall Wage Price Index (WPI) to lift by 0.6% over Q1 which would push annual growth up a touch to 2.2% from 2.1% in Q4 2017. This risk lies with a weaker 0.5% quarterly growth print because underemployment is still elevated and inflation expectations are contained.
Strongest Directional View(s)
- Buy AUDUSD, Sell USDCHF
- Two mean reverting trades
- Drivers are AU employment, short-term risk revival, commodities & ToT, CHF positioning
UBS add comments on CHF positioning to support the trade idea:
- Long USDCHF positioning made a 3-year high this week – and is now the 2nd largest notional position in CFTC/IMM data.
- It is by far the favourite long USD position in this data – and we highlight it as USDCHF spot is softening.