AUDCAD heading towards 1.00 - Westpac

Research Team at Westpac, thinks AUD/CAD is heading towards 1.00 as the rally in crude has fizzled out and the Bank of Canada was more dovish than expected.

Key Quotes

“AUD meanwhile should remain fairly steady with local data and commodities supportive.

Oil initially rallied as OPEC announced an informal meeting late Sep. Recent headlines however have seen markets more sceptical about cooperation to limit output. Canada’s Q2 GDP was weaker than expected though growth firmed in June. We expect CAD to strengthen in H2, but USD/CAD should rise towards 1.32 first.

AUD has been helped by the strong GDP print and neutral RBA guidance. Probabilities for a further rate cut by year end have dipped. Our commodity index is at highs since early 2015. AUD has also benefitted from other central banks’ loose policies so more cautious outlooks from the ECB and BoJ should limit AUD upside.

If the Fed holds steady on 21 Sep as we expect then USD should slip. We see AUD/USD around 0.77 over the next few weeks and USD/CAD at 1.30. Our year-end AUD/CAD forecast is 0.98, with softer commodity prices and a Fed hike to weigh on both AUD and CAD versus USD.”