In my previous article, I outlined the key themes overriding the FX markets for the beginning and covered a few currencies. In this piece I will look at the remaining currencies.
The Aussie is possibly one of the most interesting currencies to watch throughout 2015. With so much going on, the AUD stands to have quite a volatile year.
Many of the key drivers of the AUD are expected to have sizeable shifts next year such as US interest rates, or Chinese growth and given so many variables it will be very difficult to have a prediction for the AUDUSD in 1 year time.
Negative factors for the year ahead are as such. Looking at the 5 year real yield, we can see a strong and tight fit to the AUDUSD
With higher US rates, and higher market risks (and volatility), the AUD's yield pick-up becomes less and less attractive.
Furthermore, Weak Chinese demand has led to far far lower demand in the construction sector in the domestic economy. This can be clearly reflected in the decline in Iron ore prices (below) which are down some 40% in 2014 and has a less than promising outlook for 2015.
However it's not all bad for the Aussie. Lets consider for a minute we are a large …