U.S. rates likely to be higher than Australia’s soon, short AUD/USD?
U.S. interest rates may overtake Australia interest rates for the 5th time in history in the next 6 months. How will it impact AUD/USD?
If U.S. Fed continues to lift the Fed funds rate, the Australia-S. official interest rates differential will eventually move into negative territory. The current differential is positive 25 basis points.
In the past, a negative Australia-S. interest rates differential has put considerable downward pressure on AUD/USD.
Even if the dollar index is unlikely to appreciate much without the delivery of U.S. company tax cuts, AUD/USD could still fall below December 2016 level of 0.7160.
China growth slowing down has become more inevitable, which could further encourage RBA to maintain loose policy and pressure Aussie lower.
Fullerton Markets Research Team
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