AUD/USD: Improving trade sentiment supporting the aussie – CIBC

Analysts at CIBC, expect the AUD/USD pair to trade at 0.71 during the first quarter of next year and at 0.74 during the third quarter.  

Key Quotes:  

“The key driver of the AUD over the past month has been global trade sentiment, specifically pertaining to the USChina negotiations. The November RBA meeting was largely a non-event, with rates left unchanged. Growth and inflation forecasts were revised higher, supported by an outlook including lower rates, increased fiscal stimulus in the form of infrastructure spending, and tax cuts.”

“Consumer spending remains lacklustre, despite the recovery in housing prices since the start of the year. Wage growth also continues to pose a challenge, despite a relatively tight labour market. This will likely remain a key focal point for the RBA moving forward. The market is currently pricing in the possibility of a rate cut mid next year, but only with a 55% probability. Developments in the labour market concerning full employment and wages will likely swing central bank expectations.”

“With the market anticipating a ‘Phase One’ deal by the end of the year, we believe that sentiment will ultimately provide support for the AUD in the near-term. Still, we expect the currency to lag its peers, such as the NZD.”