China’s recent stimulus package has provided a fresh reason to stay long on the Australian dollar (AUD). UBS analysts noted that risky assets, including the AUD, received a significant boost from China’s latest economic measures. The AUD/USD pair recently fell by 0.3%, reaching 0.6872, but it remains nearly 2% higher overall after the U.S. Federal Reserve announced a rate-cutting cycle. According to UBS, the focus key phrase “China's stimulus boosts AUD” presents an opportunity for continued growth in the AUD market.
The Federal Reserve's 50 basis-point cut contrasts with the more cautious approaches expected in other G10 economies. For instance, rate cuts in the eurozone and the U.K. are anticipated to be slower, while Australia is not expected to lower rates soon. However, UBS noted that its AUD forecasts were initially based on Australia’s domestic resilience, with no expectation of additional support from China. The surprise stimulus announcement from China adds a significant upside, making the AUD more attractive to traders.
The bank highlighted how the recent Chinese stimulus could further strengthen the AUD, even beyond its original target of 0.7000 by the end of 2024. The stimulus has already sparked a tactical rally in Chinese assets and related commodities, such as iron ore, which in turn benefits the AUD. UBS analysts believe that the market’s previously bearish outlook on China’s economic prospects could shift, pushing the AUD even higher. "China's stimulus boosts AUD," as noted by UBS, is not just a temporary effect but could lead to more persistent gains for the Australian dollar.
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China's stimulus boosts AUD, providing a fresh reason to stay long on the Australian dollar. UBS analysts predict potential growth beyond the target.
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