AUD/USD: RBA outlook supports AUD recovery – CIBC

Analysts at CIBC forecast the AUD/USD pair will rise on the months ahead, reaching 0.73 by the end of the first quarter of next year and 0.74 by the end of the second quarter. They see the outlook of the Reserve Bank of Australia supporting the recovery of the Australian dollar. 

Key Quotes: 

“The Australian dollar has rebounded from a test of major support vs the USD at 0.7000, and while in a mode of correction to the decline of the last month, looks set to extend somewhat higher. A confluence of recent factors supports the near-term positive outlook. They include a more positive economic outlook from the RBA, and from China, a RRR cut, easing of property curbs, and strong trade data.”

“The trend of AUD/USD over the last six months has been for tests of support, as a stronger USD, divergence in the outlook for monetary policy normalisation between the Fed and the RBA, and concerns over supply chain disruptions, particularly as they relate to demand from China, have all had impacts. The stronger USD continues to be an influence, and the present move is seen in the form of consolidation, as other factors have turned somewhat in favour of the AUD.”

“Though market pricing for RBA hikes is still rich to RBA guidance on when inflation will sustainably reach target, and the lift off timing between the RBA and FOMC is uneven, the implied cash rates between Australia and the US in 1-years’ time are widening in favour of AUD. The latest levels are around 97bps vs 73bps. That widening has been supportive of the recovery in AUD/USD.”