Ongoing concerns about the slow-down in the resources sector and expectations of a rate cut ahead from the RBA saw the AUD/USD lower to 1.0309 early Friday before recovering. According to the team, “ Last week our currency strategists revised our Australian dollar track – they are now forecasting the currency at 1.03 at the end of 2012, 0.9900 by the end of June 2013 and 0.9700 by the end of next year. While the currency has come down over the past week towards these levels, we don’t expect a significant pullback in the currency, even if the RBA was to cut in December because it is already priced into the market.”
Internationally, ‘fiscal cliff’ concerns have seen a negative tone in markets on both sides of the Atlantic. It is interesting to note that as soon as the US election was over, the cliff became the focus. Moody’s, echoed our view during the week, saying ‘Given the suffering that would occur if policymakers don’t act, therefore, the most plausible outcome is that they will’.