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AUD/USD likely to pullback moderately in short term, pair to trade around 0.80 by end-2017 – Lloyds Bank

The Australian dollar has gained positive momentum in the past month, briefly trading above 0.80, its highest level since May 2015, noted Lloyds Bank in a research report. The solid performance of global equity markets, the uptrend in commodity prices and stability in China all make for a supportive external environment. Moreover, domestic data indicate that the economy is in good health.

Retail sales continue to underline the strength of the consumer and there is a positive trend in full-time employment. But the Reserve Bank of Australia continues to be relatively cautious. During its August meeting, the central bank kept the interest rates on hold, while Governor Lowe and Deputy Governor Debelle have used recent speeches to push back on heightened market expectations of imminent tightening.

Both cited worries about further AUD strength “complicating” the ongoing economic rebalancing process. Given this position, a rate hike is quite unlikely this year. In the meantime, the U.S. Fed is likely to continue tightening policy, although gradually. There is a scope for moderate pullback in AUD/USD in the short term, stated Lloyds Bank.

“However, so long as the Australian economy continues on its current path and external conditions remain buoyant, we expect the pair to settle around 0.80 at year-end”, added Lloyds Bank.

At 22:00 GMT the FxWirePro's Hourly Strength Index of Australian Dollar was neutral at 41.7542, while the FxWirePro's Hourly Strength Index of US Dollar was slightly bearish at -71.2663. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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