Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Macro Strategy
Market Specialist
Australian retail sales growth in May exceeded expectations, strengthening the case for the RBA to hike rates as early as August. The RBA previously kept rates at 4.35%, but inflation risks have intensified following strong retail sales and May’s CPI rising above 4.0%. Meanwhile, Fed Chair Powell has adopted a slightly more dovish stance in response to weaker economic data. As we get early hints of Fed turning dovish while the RBA still has the inflation fight on its hands, AUDUSD seems to be hanging in the balance with two-way risks/opportunities.
The Reserve Bank of Australia continues to grapple with inflation and may lag in the current easing cycle. In fact, both the markets and the central bank itself are still keeping a rate hike on the table, although the threshold for such a move is high. Nonetheless, a hawkish stance could support the Australian dollar (AUD), particularly against currencies whose central banks are leaning towards rate cuts, such as the euro (EUR), Swiss franc (CHF), and Canadian dollar (CAD). For the AUDUSD pair to break above 0.67 sustainably, a decline in the US dollar, potentially driven by continued US disinflation, would be necessary. However, the upcoming US elections and the possibility of a second Trump presidency pose significant risks to the Aussie dollar, as any threats of tariffs on Chinese goods could weaken the AUD.
Buy Put/Sell Call for 1 month
Buy Put/Sell Put/Sell Call for 1 month
Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 1 month for a notional value of AUD 100k
Buy Put/Sell Call for 3 months
Buy Put/Sell Put/Sell Call for 3 months
Scenario Analysis comparing pay-offs of Sell Spot vs Collar vs Seagull for 3 months for a notional value of AUD 100k
Buy Call/Sell Put for 1 month
Buy Call/Sell Call/Sell Put for 1 month
Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 1 month for a notional value of AUD 100k
Buy Call/Sell Put for 3 months
Buy Call/Sell Call/Sell Put for 3 months
Scenario Analysis comparing pay-offs of Buy Spot vs Collar vs Seagull for 3 months for a notional value of AUD 100K
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