Forex analysts predict that the Australian dollar could trade for as much as 70 US cents in the next 12 months.
Over the past year, the AUD has risen from just over 64 US cents in mid-April to hovering just below the 68 US cents range in the last few days. Forecasts further reinforce this resurgence as City Index analyst Matt Simpson claims the AUD could push past 68.80 US cents in December, its highest peak since July 2023. Primarily, this stems from stubborn inflationary pressures shrouding the Australian economy (3.5% YOY in July 2024), warranting a sustained, tight monetary policy stance. This is reinforced by current forward guidance from the RBA, whereupon during the last RBA meeting, discussions of a potential rate hike was ultimately overturned by a decision to keep rates unchanged. Additionally, AMP chief economies Shane Oliver reckons that rising commodity prices and balance of trade further bolsters this. On the other hand, the US has seen monthly inflation data coming in softer than expected, accompanied by the unemployment rate rising for 4 straight months to July. With revisions revealing that the US economy had added 818,000 fewer jobs from April 2023 to March this year, an imminent rate cut from the Fed is expected from the market.
However, downside risks include a global recession and Donald Trump being re-elected and igniting a trade war with China. Further, with recent statistics showing Australia’s current account deficit widening and China’s sustained sluggish recovery, these factors threaten the AUD/USD pair recovery.
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