Fundamental Australian Dollar Forecast: Bullish
- The Australian Dollar[1] has gained with others as the Fed’s dovishness hit the greenback
- The RBA for its part is still arguably less dovish than the market
- This week might well see AUD/USD[2] gains hold
Find out what retail foreign exchange traders make of the Australian Dollar’s prospects right now, in real time, at the DailyFX Sentiment Page[3]
The Australian Dollar made gains last week, inspired by central bank commentary from the both sides of the AUD/USD pair.
The US Federal Reserve[4] left its monetary settings alone but did nothing to disabuse futures-market participants betting on a July interest rate cut. This caused a surge in bearish Dollar plays across the traded-currency complex, with the Aussie benefitting despite what was at face value even more dovish commentary from its own central bank.
Speaking in Adelaide Reserve Bank of Australia Governor Philip Lowe[5] said that expectations of another cut in the record low 1.25% Official Cash Rate were ‘no unreasonable.’ This is explicit talk indeed from a central banker. However, Lowe also pointed again to the limits of monetary policy’s effectiveness in a world were rates have been at historic lows for some years. In doing so he was perhaps, once again, less dovish than the Australian Dollar market overall. Of course, the RBA will attempt to fulfil its inflation mandate and, while pricing power remains weak, lower rates will remain an option. But, given Australia’s roaring consumer debt levels, the bar to reductions beyond a single further quarter
