1、Disclosures we tweaked our year-end AUD-USD forecast to 0.68 (from 0.66) 1. RBA calls for fiscal easing reveal the limits of monetary policy 0 . 0 00. 050. 100 . 1 50. 200 . 2 50 . 0 00. 050. 100 . 1 50. 200 . 2 510 11 12 13 14 15 16 17 18 19R BA f is c a l ja w b o n e in d ic a t o r*T er m f re q
2、u en c y* Uses machine learning to count frequency of words associated with use of fiscal policy in RBA Governor speeches Source: RBA, HSBC Currencies Global July 2019 18 Pull the other one Our thoughts around currency performance in a period of weak global growth were first set out in FX in a downt
3、urn (13 April 2018). The response of AUD assets has broadly gone to script with bond yields falling and the currency weakening as more accommodative monetary policy has proved the first line of defence (Chart 2). Instead of delivering the rate hikes that were expected in 2017-18, the RBA has provide
4、d 50bp of cuts this year, leaving the cash rate at a new all-time low of 1.0%. At the same time, the government has continued to prioritise the budget surplus and its AAA rating in its bid to advertise its prudent credentials and get re-elected a feat that it recently achieved, against the odds. The
5、 emphasis on easing financial conditions has seen the AUD fall more than 8% against the USD since we turned bearish in April 2018. Yet the recently legislated tax package has put fiscal back in focus. We have written about how a shift towards an easier fiscal stance is positive for currencies, drawi
6、ng on the recent experience of the USD, for which the cyclical boost increased interest rates and outweighed structural concerns (A fiscal game changer for FX, 3 April 2019); but there are key differences, and we do not expect fiscal policy to spark a rally in the AUD. 2. Stimulus has come from mone
7、tary policy up to now 3. Budget close to balance amid upside surprise to commodity prices 0 .51. 01 .52 .02. 53. 056606468727613 14 15 16 17 18 19A U D T W I + 12m R BA rat e (%, rhs )-70-60-50-40-30-20-100102030-7 0-6 0-5 0-4 0-3 0-2 0-1 0010203099 01 03 05 07 09 11 13 15 17Go v ernm ent s un derly
8、 ing c as h balanc eR o lli n g 1 2 m to ta l (A U D b n )Source: Bloomberg, HSBC, Note: shading = RBA rate cuts Source: HSBC, Treasury 2009 comparisons misplaced First, we assess the potential impact of the recently legislated personal tax package. Most immediately, this delivers a AUD7.5bn (0.4% o
9、f GDP) rebate to low- and middle-income households (Australian Budget Observer, 2 April 2019). This has drawn some comparisons with the 2009 stimulus that included cheques to households, where the government handed out as much as AUD900 to more than 8m Australians. Back then, heightened growth conce
10、rns were alleviated, the RBA could tighten monetary policy by the end of the year, and the AUD-USD rebounded strongly from its crisis low of 0.60 (Chart 4 and 5). However, the context and scale is different today, and we do not see it as providing the same upside risk for the AUD (Table 6). Global g
11、rowth expectations and the AUD are not nearly as depressed relative to just after the Global Financial Crisis and the total stimulus delivered across 2009 and 2010 was also far larger than what is now set to be delivered. This is even before accounting for efforts overseas, which included a near 6%
12、of GDP stimulus package in China that was far more focused on infrastructure than current measures, providing a direct benefit to Australia. 19 Currencies Global July 2019 Commodity price windfall, not looser fiscal stance The latest tax package should also not be a surprise for markets half of the
13、rebate had already been legislated in 2018 and the other half had been announced in April. Importantly for the AUD, it should be viewed as a way of recycling last years better-than-expected commodity revenues back to the economy, rather than a wholesale shift in the stance of fiscal policy. We think
14、 this should already be factored in to FX to the extent that the AUD-USD has been kept more elevated by commodity prices (Chart 7). 6. Differences in scale and context between 2019 and 2009 2009 2019 Economic conditions Estimated impact of fiscal measures (% of GDP) 4.6* 0.4 GDP growth (%) 1.5 1.8 G
15、DP growth, -12M change -1.9ppt -1.3ppt Unemployment rate (%) 5.7 5.2 Unemployment rate, -12M change +1.6ppt -0.3ppt World GDP growth (PPP weights, %) -1.9 3.3 World GDP growth, -12M change -4.9ppt -0.4ppt FX and cash rate AUD-USD 0.64 0.70 AUD-USD, -12M change -28% -6% RBA cash rate (%) 3.25 1.0 RBA
16、 cash rate, -12M change -375bp -50bp *IMF estimate over 2009 and 2010 Source: Bloomberg, HSBC Overall, we consider the current fiscal stance as broadly neutral for the AUD. It may support domestic demand in H2, but we do not expect it to lead to monetary policy tightening, unlike the 2009 experience
17、 or that of the US in 2018. 4. The AUD rebounded sharply in 2009 5. as fiscal stance turned expansionary 23456780 .50 .60. 70. 80 .91. 01. 1J un-08 Oc t -0 8 F eb-09 J un -0 9 Oc t -0 9AU D -U SD R B A c a s h ra t e (% , rh s )Leh m anB ro th e rs c oll aps esAus tralia c heq ues to hous eholds C h
18、in a s tim ulus-1 .5-1 .0-0 .50. 00 .51 .01. 52 .02 .53. 0-1. 5-1. 0-0. 50. 00. 51. 01. 52. 02. 53. 006 07 08 09 10 11 12 13 14 15 16 17 18 19 20 21 22Aus t ralia f is c a l im puls e*+ v e fis c a l im p u ls e- v e fis c al im puls e% of pot ent ial GD PSource: Bloomberg, HSBC *Note: defined as ch
19、ange in the cyclically adjusted primary balance Source: IMF April 2019 Fiscal monitor, HSBC Currencies Global July 2019 20 7. Higher commodity-related revenues should already be factored into the AUD Source: Bloomberg, HSBC The limits of monetary policy Looking beyond what is now legislated, it seem
20、s apparent that any future shift in the policy mix towards fiscal is likely to come about because of the limits of monetary policy. This has different FX implications relative to both the 2018 US and 2009 Australian episodes, when there was still ample monetary policy room. The RBAs cash rate is at
21、a new all-time low of 1.0% (Chart 8), whereas terminal rate pricing is at 0.70%, close to where the effective lower bound is thought to be. The central bank has expressed its own concerns over the diminishing returns to monetary easing recently while the Governor has also talked about the “danger” o
22、f engaging in competitive easing purely to lower the AUD further (see quote below), presumably because of worries about further inflating leverage in the housing sector. The RBAs fiscal jawbone Instead of trying to jawbone financial conditions further, the RBA has focused its energy on jawboning the
23、 fiscal authorities. This is revealed by our proprietary RBA fiscal jawbone indicator, which uses machine learning to look at the frequency of the central banks calls for fiscal easing (Chart 9). The indicator picks up on the rise in references in RBA speeches to phrases that reference other policy
24、options (i.e. apart from monetary policy) and include words such as “government”, “tax” and “infrastructure”. The indicator has just risen to new highs. 0204060801 0 01 2 01 4 01 6 01 8 02 0 00 . 4 00 . 5 00 . 6 00 . 7 00 . 8 00 . 9 01 . 0 01 . 1 01 . 2 005 06 07 08 09 10 11 12 13 14 15 16 17 18 19A
25、 U D - U S D C o m m o d it y p r ic e i n d e x in U S D ( r h s 1 )- 3 0 0- 2 0 0- 1 0 001 0 02 0 03 0 04 0 05 0 06 0 02 Y r a t e d if f e r e n t ia l ( r h s 2 , b p )8. New lows in the RBAs cash rate 9. triggering calls for fiscal easing -1 .00. 01. 02. 03. 04. 05. 0-1. 00. 01. 02. 03. 04. 05.
26、 0U S D N Z D C A D A U D N O K G B P E U R J P Y C H F SEKSin c e s tar t of 2 00 9 La tes t% %Po li c y rat e:0. 000. 050. 100. 150. 200. 250. 000. 050. 100. 150. 200. 2510 11 12 13 14 15 16 17 18 19R BA f is c a l jaw bon e ind ic at or*T erm freque nc ySource: Bloomberg, HSBC *Uses machine learn
27、ing to count frequency of words associated with use of fiscal policy in RBA Governor speeches Source: RBA, HSBC 21 Currencies Global July 2019 Whereas the governments communication remains focused on getting the budget bottom line back to surplus this year continuing the pre-election message we doub
28、t that they would sit on their hands if recession concerns did start to build in earnest. The government debt-to-GDP ratio is low on an international comparison, in contrast to private sector leverage, so structural concerns about debt sustainability under a more expansionary fiscal policy would be
29、muted (Chart 10). The reason for preserving fiscal buffers is presumably so they can be used to support growth in a downturn. This could be one reason why AUD-USD has struggled to break much below 0.68 even as sentiment towards the domestic economy has remained quite negative. We could be at the poi
30、nt where the AUD is less responsive to further bad economic news as it brings higher probabilities of fiscal stimulus. The RBAs current stance suggests this would be a preferable option to unconventional monetary policy measures such as QE, which would see the currency much lower than even we have b
31、een forecasting (see What if? QE downunder, 14 March 2019). There is also the possibility that the policy response already delivered proves sufficient to stabilise domestic demand in the second half of the year, as our economists expect. However, for now we think that any AUD outperformance on this
32、basis is likely to be limited to the crosses given downside global growth risks and our strong USD view. 10. Government debt low, household debt high D KKN O KNZD C H FA U DSEK0501001502002500501001502002500 20 40 60 80 100 120 140H o u s e h o l d d e b t ( % o f G D P )G o v t d e b t (% of GD P)N
33、ote: includes 42 DM and EM countries, dashed line show global average Source: BIS, HSBC If everyone is easing then there is no exchange rate channel It might be possible if you ease a bit more than others - you might get a bit extra growth - but that is a dangerous path to go down. RBA Governor Lowe
34、 speaking on a panel (24 June 2019) Currencies Global July 2019 22 Fiscal unlikely to spark AUD gains but should limit downside Overall, we do not view fiscal policy as AUD-positive at this stage. Any shift towards providing more budgetary stimulus is likely to reflect the limits of monetary policy
35、in stimulating growth, which is different from previous episodes, when fiscal loosening drove central banks to tighten and has been FX-positive. Instead of expecting an imminent fiscal stimulus to light a match under AUD-USD, we prefer to think of it as limiting the downside of AUD in case growth we
36、akens further. In particular, the presence of fiscal ammunition reduces the tail risk of policies that embrace competitive devaluation. Accordingly, we tweaked our year-end AUD-USD forecast up to 0.68 (from 0.66). 11. HSBC AUD-USD forecast Forecast Current Spot Q3f 19 Q4f 19 Q1f 20 Q2f 20 Current 0.
37、69 0.69 0.68 0.68 0.68 Old 0.67 0.66 0.66 0.66 Source: HSBC 23 Currencies Global July 2019 G10 at a glance USD-CAD Canada: Global trumps local 0 .9 01. 001 .1 01 .2 01 .3 01. 401 .5 00 .9 01. 001 .1 01 .2 01 .3 01. 401 .5 005 06 07 08 09 10 11 12 13 14 15 16 17 18 19 We expect USD-CAD to finish the
38、year at 1.40. In part, this reflects our bullishness on the USD as we believe the market is overly aggressive in its Fed cut expectations, and the USD will fare better than many of its peers as the global slowdown extends. For the CAD, it is a battle between the generally positive local influences a
39、nd the headwinds from global influences. Economic activity has been holding up better than expected and labour market data shows continued underlying strength. There is no pressing requirement for the Bank of Canada to ease policy even as much of G10 delivers easing or contemplates it. However, glob
40、al factors suggest the CAD could face renewed selling pressure during H2 19. There has been some relief regarding US-China trade tensions following the G20 summit but the gap between the two sides still appears wide and an agreement may not be garnered anytime soon. Canadian business uncertainty is
41、likely to persist as a result, while weakening global PMIs pose a further challenge to a risk on commodity currency like the CAD. Passage of the CUSMA trade deal remains similarly elusive and political uncertainty may intensify in the run-up to the election later this year. Source: HSBC, Bloomberg N
42、ZD-USD New Zealand: Will not be out-doved 0 .4 50 .5 00. 550 .6 00 .6 50 .7 00 .7 50. 800 .8 50 .9 00 .4 50 .5 00. 550 .6 00 .6 50 .7 00 .7 50. 800 .8 50 .9 005 06 07 08 09 10 11 12 13 14 15 16 17 18 19 We still think NZD-USD has room to fall towards 0.62 this year. The currency is sensitive to risk
43、 aversion, and could be particularly vulnerable if this is triggered by the Fed not matching the markets dovish expectations for rates. Closer to home, monetary policy can weigh further on the NZD ahead of the next policy meeting (7 August). The RBNZ led the dovish central bank charge in becoming th
44、e first G10 central bank to cut rates in May. Since then, the RBA has cut twice and both the ECB and the US Fed have signalled a strong willingness to consider more accommodative monetary policy. The RBNZ is likely to push back against NZD outperformance and has proved particularly sensitive to an A
45、UD-NZD rate approaching parity. The final piece of the jigsaw is US-China trade talks The NZD has closely tracked Asian currencies since tariffs on Chinese exports were increased in May. The supposed G20 truce at the end of June has provided little lasting relief while headline risk remains high. So
46、urce: HSBC, Bloomberg EUR-NOK Norway: Dancing alone for now 7. 07. 58. 08. 59. 09. 510. 010. 57. 07 .58. 08 .59 .09 .510. 010. 505 06 07 08 09 10 11 12 13 14 15 16 17 18 19 The Norges Bank has stuck to a hawkish bias while other G10 central banks have turned more dovish. The central bank hiked 25bp
47、on 20 June and stuck to a forecast which points to another rate hike in 2019 and further tightening in 2020. We are sceptical that the Norges Bank will be able to deliver this degree of tightening. Our economists expect the dovish shift in global policy outlooks to eventually catch up with the Norge
48、s Bank. The latest CPI prints suggest that inflation peaked earlier in 2019, while there are also signs of softening domestic growth such as the latest PMI. Alongside the growing risks to global growth, this suggests that the Norges Bank might end up disappointing the current hawkish rate hike profi
49、le. Any signs of a dovish tilt by the central bank could see the NOK come under significant pressure as the last remaining G10 currency where hikes are priced in. We see EUR-NOK rising to 10.30. Source: HSBC, Bloomberg Currencies Global July 2019 24 Asian currencies appreciated sharply in the middle of June, and have mostly extended, or at least held onto, those gains up to the first week of July. The appreciation was catalysed by: (1) a resumption of US-China trade talks, which was first hinted at by US Pr
