Favour AUD over NZD, CAD in 2017 - RBS

Research Team at RBS suggests that the commodity currencies will be affected by USD strength but AUD should benefit most from reflation in US and China.

Key Quotes

“The RBA seems the least likely to ease in 2017 but remains concerned by uncertainty over the labour market and wages. AUDUSD has traded 0.68-0.78 in 2016. In 2017 it is likely to remain a sell on rallies above the middle of this year’s range.”

“The kiwi appears more vulnerable as the RBNZ is willing to consider further easing if the TWI stays above forecast. NZDUSD looks set to trade into a lower 0.65-0.70 range in 2017 given further Fed hikes plus risk of RBNZ still easing.”

“Business investment and confidence may remain slow to recover in Canada, especially if NAFTA negotiations drag on. Persistently weak growth, falling inflation pressure, and a slowing in the housing market give BoC scope to ease in H1’17.”