With unprecedented monetary & fiscal policy and the RBA increasingly positive about the recovery, but hampered by renewed lockdowns affecting large parts of Australia, Tapas Strickland (Director, Economics NAB) will dissect the economic outlook for both the Australian and International Economy.

We will explore what the next steps in a recovery will look like and what economic risks you should take into consideration for your long term planning.

NAB’s Senior FX strategist Rodrigo Catril meets with our Group Economist Phin Ziebell to discuss the impact of the recent RBA meeting on the AUD.

With the RBA sounding ever so slightly more hawkish, the AUD enjoyed some post meeting strength. However Rodrigo and Phin discuss why that rally was short lived and the impact that Central Banks will have on the currency through to the end of the year.

Phin Ziebell joins Ray Attrill, Head of FX Strategy, to discuss the volatility we have seen in the AUD post FOMC and what this means for our forecasts. With the AUD closing the month below 75 cents, Phin asks where this leaves NAB’s AUD forecasts. Ray discusses what occurred through June, including the AUD fall post FOMC and the impact of China clamping down on perceived speculation in the commodity market.

Ray discusses his key takeaways for FY 21, stating it was a year of two halves with early strength in the AUD when the market was full of optimisation, and more recently when the AUD lost its shine thanks to the movement in the US interest rate market. Fundamentally Ray still believes the AUD will move higher with our fair value model suggesting 80 cents remains our target this year. However recent history suggests the AUD won’t necessarily move in a straight line higher. Ray discusses key risks to his view are the Federal Reserve moving interest rates sooner than expected or larger economies move into new lockdowns that will impact global growth.

Phin Ziebell joins Rodrigo Catril, Senior FX Strategist. Phin and Rodrigo discuss the post FOMC market volatility with Rodrigo highlighting the unwinding of USD short positioning as a big factor contributing to the post FOMC greenback appreciation. Phin and Rodrigo then touch on NAB’s outlook for the AUD where fundamentally not much has changed, the global growth outlook remains on a strong footing favouring buoyancy in commodity prices while domestically the strength of the economy and recovery of the labour market also point to the AUD moving higher from here. There are, however, risks to this outlook with Phin and Rodrigo noting how vulnerable Australia remains to covid outbreaks amid the low level of vaccination per population. Tony Prove joins the chat and discusses recent exporters and importers activity in light of a lower AUD.

Phin Ziebell joins Ray Attrill, Head of FX Strategy. Phin asks Ray about the 2% sell off in the AUD post this week’s FOMC (Fed) meeting. Ray discusses the shift in expectations for US interest rates embedded in the FOMC’s so called ‘dot plot’ as being a key driver for this week’s USD strength and relate AUD weakness. Phin asks Ray about movement in other currencies against the USD, including the weakness of the EUR. Ray discusses the NAB (stronger) AUD forecasts as being maintained for Q3 and Q4 notwithstanding the probable ‘miss’ in the end-Q2 forecasts.

Ray backs this view by discussing global economic growth rebounding at pace in H2 2021, in a post COVID globally vaccinated economy, as something that is historically negative for the USD and positive for the AUD. Ray discussed how quickly FX markets can move and large moves are not unusual when the market forms the view that currencies are mispriced.

Phin finishes by asking Ray about interest rate differentials as a potential negative for the AUD

Phin Ziebell joins Rodrigo Catril, Senior FX Strategist, in an FX discussion touching on last week’s brief AUD fall below 77c and its recovery back above the figure post US nonfarm payrolls late on Friday. Rodrigo notes that ahead of the FOMC meeting next week, speculation around Fed QE tapering talk is supporting the USD, but at the same time elevated commodity prices remain a solid fundamental force favouring a stronger AUD. Phin and Rodrigo also discuss COVID vaccination as a driver for economic recovery and confidence both in Australia and Globally. The two then touch on NAB’s unchanged forecast for the AUD/USD that sees the pair trading above 80c in H2-2021, supported by NAB’s expectations for commodity prices to remain elevated, aided by a resilient vaccine powered global economic recovery and a softer USD outlook

Phin Ziebell joins Ray Attrill, Head of FX Strategy and Jarryd Freeman, Director Financial Markets for this week’s podcast. Ray describes May as having been an extremely low volatility month for AUD/USD (in fact the narrowest monthly range since November 2019). Notwithstanding that NAB’s Fair Value Models and related commodity price strength suggest the AUD should have been much higher, Ray notes that May has traditionally been a weak month for the AUD (and June a stronger one). Phin asks Ray about the recent strengthening in the Yuan, which headed below 6.40 against the USD, and the implications for the AUD/CNH cross, as well as upcoming FX event risk. Jarryd Freeman then joins Phin and discusses client themes and categorises them as markets and non-markets ones. Jarryd describes key exporter and importer issues and considerations, including possible flexible hedging options for clients.

Phin Ziebell joins Rodrigo Catril Senior FX Strategist. Rodrigo discusses recent AUD/USD tight trading ranges, but then offers interesting dynamic from fresh EUR and CNY appreciation which favour the AUD breaking higher, in line with NAB Forecasts.Looking at what is coming, next week’s Australia Q1 GDP is likely to provide another piece of evidence supporting a robust economic recovery. NAB has pencilled in a Q1 GDP print of 1.0% q/q, with much of the strength to come from an ongoing recovery in services consumption, Rodrigo notes that this should be a good story for the AUD along with the expected buoyancy in commodity prices. Phin moves on to ask Rodrigo about yesterday’s RBNZ meeting, the Bank’s forward guidance on the overnight cash rate as well as commentary on New Zealand’s labour market and wages growth.

Jon Buckle Senior Markets Manager joins and give us his insights about client activity. Jon talks about, clients currently thinking about setting budget rates, consulting with clients with their FX risk management strategies. Jon also discusses the ongoing issue of global supply chain issues and shipping costs.

In this week’s FX and Your Business Podcast, Phin Ziebell talks to NAB’s Head of FX Strategy, Ray Attrill, about latest currency market developments, the significance of commodity prices – the sharp run up in iron ore price in particular – and what to look out of in coming days. Ray stresses that volatility in the iron ore price is often not a reliable guide to the performance of the AUD (but that he still thinks the AUD will be higher in coming months largely because of commodity prices!). He also talks about the significance of the recent strengthening in European currencies, which have seen the AUD/EUR and AUD/GBP cross rates fall back from highs seen earlier in the year.

Phin also talks to Jonathon Cross, Senior Markets Manager in NAB’s Corporate and Institutional banking team in Perth, who shares some insights on mining client activity in WA against the backdrop of the extraordinary strength in iron ore prices.

Phin Ziebell talks about inflation and FX implications with Rodrigo Catril Senior FX Strategist and Chris O’Brien Senior Markets Manager.

Phin and Rodrigo dissect the factors driving inflation higher including supply chain disruptions, pent up demand and base effects. The two also discuss the distinction between Demand Pull and Cost Pull Inflation. The role of Central Banks is also analysed including the debate around new tolerance for higher inflation along with implications for the USD and AUD.

Chris O’Brien joins and reveals Demand and Supply dynamics affecting clients in particular Freight rates, raw imports and accessing supply. Chris discusses FX exporters and importers activity highlighting effective FX hedging strategies that have been used to help our clients manage their FX exposures.