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AUD to benefit from China stabilization – OCBC

The AUD rose after timid signs of improvement in China data. The economists of OCBC Bank analyze the outlook for the AUD.

Room for profits

Looking ahead, we continue to prefer AUD to trade higher due to expectations that China’s growth could stabilize at some point, possibly warmer ties between Australia and China, and a more moderate to soft USD profile ( as the Fed nears the end of the tightening cycle and embarks on the rate cutting cycle in 2024).

We have shared that Australia’s tourism, education and real estate sectors could benefit if relations between China and Australia warm up further, and this may be positive for the AUD.

The main downside risk factors that may affect the AUD outlook are: 1/ the extent of CNH swings; 2/ if USD strength or the Fed tightening cycle is unexpectedly prolonged; 3/ global growth prospects, if the DM slowdown deteriorates; 4/ any risk aversion event in the markets.

Source: Fx Street

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