AUD should be capped closer to 0.7500 - Westpac

Robert Rennie, Research Analyst at Westpac, suggests that the next week in Australia will be dominated by the results of the Federal Election over the weekend and the outcome of the RBA.

Key Quotes

“Labor requires a 4% swing for a change of Government which is a sizeable challenge. For the RBA, given global developments, we would expect to see some guidance suggesting some ‘scope’ for lower rates next week. On top of the above, we have May trade balance and retail sales.

Ahead of the Brexit vote, I argued strength up to 0.76 was a sell. While Brexit will likely delay a Fed hike into next year, we face a Federal Election this weekend with polls too close to call, a potential shift to an easing bias at the RBA and a possible negative outlook from S&P later this month depending on how the House and Senate land.

Weaker UK growth, a summer of European discontent and lots more political risk to come all suggest the A$ should now be capped closer to 0.7500.”