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AUD forecast

Australian dollar edges higher after RBA minutes, awaiting global central bank decisions 

 

The Australian dollar (AUD/USD) edged up slightly on Tuesday, trading at approximately $0.648, with a largely subdued market response following the release of the Reserve Bank of Australia's meeting minutes. 
 
These minutes revealed that the central bank had considered implementing another 25-basis-point interest rate hike in September, but ultimately opted to maintain the current rate at 4.1%. The board acknowledged that there were indicators, such as sluggish productivity growth and elevated inflation in service prices, supporting the argument for raising interest rates. However, these factors were ultimately overshadowed by the concern that the impact of a tightening cycle, only launched in May last year the previous year, are yet to be felt. 

“The recent flow of data was consistent with inflation returning to target within a reasonable timeframe while the cash rate remained at its present level,” the minutes showed. 

“Members recognised the value of allowing more time to see the full effects of tightening of monetary policy since May 2022, given the lags in the transmission of policy through the economy." 

Furthermore, policymakers expressed concerns that the Australian economy might experience a more pronounced slowdown than anticipated, triggered by diminished domestic consumption and demand uncertainties from China, Australia's leading trading partner.  

Investors remained cautious as they awaited crucial monetary policy decisions from the U.S. Federal Reserve, the Bank of England, and the Bank of Japan, all scheduled for this week. 

 

“The recent flow of data was consistent with inflation returning to target within a reasonable timeframe while the cash rate remained at its present level,” the minutes showed. "Members recognised the value of allowing more time to see the full effects of tightening of monetary policy since May 2022, given the lags in the transmission of policy through the economy."

AUD forecasts: Analysts see upside for Aussie 

 

UOB Group Economist Lee Sue Ann and Markets Strategist Quek Ser Leang offered the following 24-hour view on the AUD/USD currency pair on September 20: 
 

“We expected AUD to edge higher yesterday. However, we indicated that ‘in view of the mild upward pressure, any advance is not expected to break the major resistance at 0.6485.’ Our expectations were not wrong, as AUD rose to 0.6474 before easing off. The mild upward pressure is intact, and there is room for AUD to continue to edge higher. That said, a sustained break above 0.6485 is unlikely. On the downside, a breach of 0.6430 (minor support is at 0.6445) would suggest that the current mild upward pressure has eased.”

In a longer-term AUD/USD projection, the UOB analysts wrote: 

“Two days ago (18 Sep, spot at 0.6435), we highlighted that as long as 0.6385 is not breached, there is a chance for AUD to test the resistance at 0.6485. AUD did not quite test 0.6485 as it rose to 0.6474 on Tuesday and Wednesday. Upward momentum has improved, albeit not by much. AUD is likely to trade with an upward bias, and if it breaks above 0.6485, it will likely advance further to 0.6515. The upside bias is intact as long as AUD stays above 0.6410 (‘strong support’ level previously at 0.6385).”

In similar long-term forecasts, Australian bank Westpac forecast an AUD/USD exchange rate of 0.68 by June 2024, while National Australia Bank predicted AUD to be 0.71 to the US dollar by June 2024. 

The forecasts were down from the bank’s projections last September, where Westpac was forecasting the Australian dollar to be worth 0.74 by June 2024, while NAB predicted 0.72 to the dollar for the same time period. 

In their FX Snapshot, last updated on September 18, analysts at Citibank Hong Kong’s Wealth Management division wrote that the Aussie would likely outperform the New Zealand dollar in the short term: 
 

“Citi analysts see tentative signs of a cyclical bottom in China following policy measures to support the property sector announced at the end of August. A continued improvement in the economic data would likely provide a tailwind for Chinese imports of iron ore and coal. As such, antipodeans stand to broadly benefit through improved terms of trade dynamics. In the short term, they expect AUD to outperform NZD due to (1) favourable relative terms of trade and (2) a more hawkish outlook for the RBA. AUD is also set to outperform GBP over the more medium to longer term but weaken vs JPY as the BoJ moves to tighten financial conditions in Japan.”

 

Citi’s 3-month Australian dollar forecast placed the AUD/USD exchange rate at a potential average of $0.65, which could remain for the foreseeable future (6 to 12 months’ time), according to the bank. Citi’s long-term AUD forecast was bullish, projecting the AUD/USD pair to trade at a potential average of $0.76. 

When considering foreign currency (forex) for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss. Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.   

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