Fundamental Australian Dollar[1] Forecast: Neutral
- The Australian Dollar markets seems back to the thesis that the next interest rate move, when it comes, will be a rise
- Of course it probably won’t come soon, and futures markets reflect this
- But the currency has at margin a little more support here than it did
Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page[2]
The Australian Dollar has completely lacked interest-rate support against its big US brother for most of this year.
The US Federal Reserve has raised interest rates three times and is expected to do so again in December[3]. Meanwhile the Reserve Bank of Australia has left its own key Official Cash Rate alone at the post-crisis low of 1.5% for 27 months. That is record stasis by modern Australian standards. To make matters worse for Aussie Dollar bulls, local rate futures markets do not fully price in a rise here until early in 2020.
However, for all this the Australian Dollar has edged higher in the last ten trading days or so. What is going on here?
Well, part of the Aussie’s vigor may just be down to the paring of extreme short positions against it. [4] Numbers from the Commodity Futures Trading Commission earlier this month showed such bets at three-year highs. For all Australian inflation’s stubborn weakness (and it’s this above all which drives prognoses of monetary torpor), this was an outsize wager against the currency of a Triple-A-rated economy still growing strongly and creating jobs at
