UBS Global FX Strategy FX Compass: AUD Target Raised to 0.74
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UBS observes a fractured global market: Brent forwards exceed $90 amid Strait of Hormuz disruptions and Middle East military activity, yet the VIX remains near 17 as risk assets defy the traditional energy-shock playbook. The AI and technology rally likely sustains this risk appetite, making contrarian short positions costly.
The defining G10 FX event was Japan's approximately $35 billion USD/JPY selling intervention on April 30, the first since the 2024 intervention cycle. While this reduces probability of rapid yen depreciation, UBS maintains a structurally bearish yen view, favoring USD/JPY dips. Resistance near 160 has stiffened given Japan's $1.4 trillion in reserves.
UBS stays near-term bearish on sterling, targeting EUR/GBP at 0.89 by Q2 end, citing unpriced UK local election and fiscal risks. NOK targets were adjusted to EUR/NOK 10.75 by Q2 end and 11.20 by year-end. The Swiss franc may serve increasingly as a funding currency against high-yielders.
Australia's RBA delivered a third consecutive rate hike, supported by resilient demand, pension fund hedging inflows, and improving valuations. UBS raised its AUD/USD year-end target to 0.74 and maintains short EUR/AUD as a top trade idea. The firm expects AUD/NZD near 1.20 by year-end, skeptical that RBNZ pricing reflects genuine demand strength.
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