Societe Generale analysts argue that the Australian Dollar’s (AUD) strong year-to-date performance leaves it vulnerable to concerns over imported petroleum dependence during the Gulf blockade. They discuss potential short AUD/NZD and short AUD/CAD ideas, while stressing that any easing of the United States (US) blockade could quickly reverse Australian Dollar weakness and keep volatility suppressed.

Petroleum exposure weighs on Australian Dollar

"My first thought was that the Australian dollar has had a great run this year (up 8 ½% including interest against the USD) but is now, once again, vulnerable to concerns about dependence on imported petroleum products."

"I’ve written before about Australia’s trade surpluses in coal and natural gas, which are twice as big as deficits in diesel/petrol/jet fuel."

"Shorting AUD/NZD at current levels isn’t without merit after a 12% rally over the last year. Shorting AUD against CAD has obvious appeal."

"The trouble with both those trades is that if President Trump decides to (even temporarily) ease the Gulf blockade in order to facilitate a new round of peace talks, the AUD might take off like an overexcited kookaburra."

"No wonder there’s no volatility."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)