Analysts at CIBC, see the Australian dollar moving higher against the US dollar over the next year. They forecast AUD/USD at 0.75 in Q1 2019 and at 0.77 in Q3.
Key Quotes:
“We’re still fairly constructive in our AUD view. Despite concerns related to an over-indebted household sector, the Australian economy is performing just fine. A solid Q2 result led the RBA to upgrade its H2 2018 growth forecast from 3.25% to 3.5%, while GDP is also expected to average a respectable 3% into 2020.”
“Speaking of the RBA, it’s set to remain on hold until at least the latter half of 2019, preferring to see some signs of wage growth of 3% to offer some reprieve to the indebted household sector. However, risks to domestic wages are higher given that capacity utilization has recovered to levels that have justified rate hikes in the
past. This should feed into consumer prices, especially the trimmed mean gauge which has been subdued since the terms of trade shock.”
“With AUDUSD bouncing back from year-to-date lows and with speculative shorts beginning to be pared back, the balance of risk for AUDUSD has begun to shift to the upside. Although US/China trade tensions and weaker Chinese demand remain a concern, our view is that the market has already priced in a large degree of downside risk. We’re getting closer to an improved domestic outlook outweighing the negatives of the external backdrop.”
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