MS look for the Australian dollar to receive further support
The three pillars mentioned in the headline from MS are:
1. The national banks' regulator confirming easier mortgage rules (this was on Friday last week)
- Australia's weak property market will receive a shot in the arm with lenders being able to use lower buffers for mortgage stress tests in loan assessments, which should allow home buyers to borrow more.
2. AU$158bn tax stimulus provided by the Morrison government should also help the economy weather headwinds provided by slowing global trade and implicitly weaker external demand
3. Easing mortgage lending rules and a fiscal stimulus should provide some relief for the RBA
Adds MS:
- Australia may turn into a role model of an economy shifting away from the dominant use of monetary policy tools towards a balanced use of fiscal, regulatory and monetary measures
For the currency:
- Stay AUD long
- Our positioning tracker indicates that market participants are still short AUD, but these positions are now at risk with yield differentials starting to turn in AUD's favour
