Synopsis:

HSBC provides an updated outlook for AUD/USD and NZD/USD.

Key Points:

1. AUD/USD Outlook:

   • RBA Stance: The Reserve Bank of Australia (RBA) signaled a firm stance to hold rates unchanged in the near term at its August meeting, which could benefit AUD/USD.
   • China's Influence: Despite elevated commodity prices and a healthy terms of trade, the lack of improvement in China’s steel demand and soft leading indicators for China’s import cycle limit AUD/USD upside.
   • Target: HSBC targets AUD/USD at 0.68 by year-end, reflecting modest upside potential.

2. NZD/USD Outlook:

   • Domestic Challenges: NZD faces significant domestic headwinds, and the longer the restrictive policy stance is maintained, the steeper the subsequent easing cycle could be.
   • RBNZ Positioning: A potential hold at the August RBNZ meeting may present an opportunity to position for NZD weakness.
   • Target: HSBC targets NZD/USD at 0.59 by year-end, indicating expectations for further downside.

3. AUD/NZD Outlook:

   • Higher AUD/NZD: HSBC also expects AUD/NZD to move higher, reflecting stronger relative performance of AUD compared to NZD.

Conclusion:

HSBC remains cautious on both AUD/USD and NZD/USD, with expectations for moderate gains in AUD/USD and further weakness in NZD/USD, driven by domestic and external factors.