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The recent downgrade of the US's AAA rating by Moody's has heightened concerns over the USD, prompting investors to consider rebalancing their FX exposure. With expected gradual USD weakness, opportunities to diversify into currencies like EUR, JPY, GBP, and AUD are emerging, alongside maintaining a 5% gold allocation due to ongoing geopolitical tensions. Additionally, the AUD faces downside risks from a dovish RBA, while the USDHKD remains a viable funding currency within its pegged trading band, particularly when interest rate differentials favor HKD borrowing.
AUD/USD closed lower at 0.6403, influenced by easing US-China trade tensions and a strong Australian jobs report, which saw 89,000 jobs added in April. Despite a US credit rating downgrade by Moody's, the Australian dollar remained stable ahead of the RBA's interest rate decision, with expectations of a 25 basis point cut to 3.85% at the upcoming meeting. The RBA's cautious stance reflects ongoing inflation concerns and a balanced labor market, with further cuts anticipated in August.
The unemployment rate held steady at 4.1% as the participation rate rose to 67.1%. Crude oil remained flat at $61.31, while gold fell 2.76% to $3,235. Key upcoming economic events include the RBA interest rate meeting on May 20 and the US S&P Flash PMI on May 22. In the UK, inflation slowed to 2.6%, prompting a 25 bp rate cut by the Bank of England. Japan's inflation eased slightly to 3.6%, but persistent pressures may complicate the Bank of Japan's policy decisions.
UBS has downgraded Coronado Global Resources Inc. from Buy to Neutral, lowering the price target from AUD0.31 to AUD0.19 due to a less favorable coal market outlook. The firm anticipates margin pressures will hinder long-term growth, necessitating additional funding and resulting in reduced earnings per share forecasts for 2025 and 2026.
The US dollar is poised for long-term depreciation due to extreme valuations and changing fiscal policies, according to Deutsche Bank. The dollar has been overvalued by over 20% relative to purchasing power parity for three years, while the widening current account deficit raises further concerns. Although short-term fluctuations may support the dollar, multiple downward pressures suggest a challenging outlook ahead.
The US Tech 100 has gained 1.6%, driven by a resurgence in AI investments, suggesting a potential retest of record highs. Meanwhile, crude oil has rebounded amid easing US-China trade tensions, while gold prices have retreated as economic outlook improves. The Australian dollar shows positive momentum, and Bitcoin is consolidating after recent gains, with a bullish outlook for future highs.
Gold prices have plateaued amid improved risk appetite and recent US-China tariff de-escalation, prompting a recommendation to optimize gold allocations during price dips. Despite a stronger USD potentially cooling demand, robust medium-term gold demand persists, driven by central banks and ETFs. As USD strength may be temporary, diversifying out of USD into gold and other currencies is advised, with expectations of gold reaching USD 3,500/oz in the central scenario.
CIO advises investors to maintain a full strategic allocation to US stocks, despite downgrading equities to Neutral from Attractive due to ongoing uncertainty in trade negotiations. The recent market rally, driven by reduced trade fears, suggests a balanced risk-reward scenario, with a positive outlook for sectors like communications, technology, and healthcare. Investors are encouraged to phase into stocks and seek opportunities amid recent volatility, while also considering currency adjustments in light of anticipated dollar weakness.
Raiffeisen Bank has partnered with Wise Platform to enhance cross-border payment services for clients in Central and Eastern Europe. This collaboration aims to provide fast, secure, and cost-effective international transactions, allowing customers to transfer money conveniently from their Raiffeisen accounts. The integration of Wise’s infrastructure will facilitate instant and transparent payments across over 160 countries and in more than 40 currencies, while both institutions remain committed to meeting regulatory requirements and evolving client needs.
UBS analyst Tom Bodor has upgraded Goodman Group from Neutral to Buy, setting a new price target of AUD 36.00, down from AUD 36.80. This decision follows an analysis of the company's development pipeline and financing strategies, particularly after a recent $4 billion equity raise.Bodor addressed concerns regarding the capital needed for Goodman Group's ambitious data center strategy, suggesting that development joint ventures could significantly reduce financing needs. Despite a slight reduction in operating earnings per share and price target, he remains optimistic about the company's potential for medium-term growth, estimating a possible upside of 44% if demand for data centers continues to rise.
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The information provided herein is generated by experimental artificial intelligence and is for informational purposes only.
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