AUD/USD Outlook

The Australian dollar has declined against the USD over the past month but is little changed against a wider basket of currencies. This suggests that the move has been driven by a change in US rather than domestic fundamentals. Recent domestic economic data have been mixed, with GDP growth still below trend and inflation below target. 

However, the statement following the RBA's November policy meeting showed it in no hurry to ease monetary policy further. Meanwhile, RBA Governor Stevens' comments on the AUD have been more tempered of late, dropping references to the currency being overvalued. Consequently, while the RBA still maintains an easing policy bias, the consensus expectation is that policy will be left unchanged at least until after the summer break. 

Despite this, further short-term AUD weakness is possible and AUD/USD could retest its recent low just below 0.69 if the US Fed hikes in December. However, it is now likely that the AUD is at or close to bottoming and probably will be range bound for the next few months, before beginning a retracement later next year as global economic activity improves and commodity prices strengthen.