Top Trade Pick: long AUDJPY attractive as global growth rebounds
Our favoured trade recommendation in the G10 currently is long AUDJPY, which we see performing through most of the FOMC scenarios. If the Fed refrains from tapering or delivers only a modest reduction in purchases, risk appetite should remain supportive for AUDJPY. While the cross would be vulnerable to a sell-off on a strong tapering outcome, this is quite unlikely in our view. Short investor positioning remains key for the AUD – we think it has plenty of room to catch up with stronger global fundamentals and in particular with the pricing out of the ‘hard landing’ scenario in China. In Japan, we expect the August trade deficit to widen on Thursday, mainly on account of higher imported energy costs. Overall however, recent data has been positive for Abenomics and latest press reports suggest the consumption tax hike is likely to be announced on 1 October, an outcome that would be consistent with the weakening JPY trend.
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BNP Paribas