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The Australian economy has been negatively impacted by the China coronavirus and devastating bushfires. How will this affect the Australian dollar in the coming weeks?

Here is their view, courtesy of eFXdata:

CIBC Research discusses AUD outlook and  adopts a neutral bias over the coming weeks. CIBC targets AUD/USD at 0.67 by end of Q1 and at 0.68 by end of Q2.

“The combination of the bushfires and coronavirus fears saw AUD/USD fall over 5.0% from the highs seen at the beginning of this year. This month, AUD/USD pared some of those losses, as the initial shock of the virus has now calmed. In addition, the RBA policy decision was less dovish than the market expected, with the Bank reiterating that it was comfortable remaining on hold for now. Rate cut expectations were postponed from Q2 2020 to Q4 after the meeting, thereby establishing a bottom for the currency,” CIBC  notes.

We caution that there are near-term headwinds facing the AUD, especially as the full ramifications of the coronavirus and the bushfires are not yet known.  We remain neutral on the AUD in the coming weeks, as we wait to see how these events feed through to hard data,” CIBC adds.

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