Minna Kuusisto, Analyst at Danske Bank, explains that AUD/USD has reversed the move after the US elections which pushed the pair as low as below 0.72 around year-end as the lack of details of the US administration’s economic plans weighed on USD and supported AUD January-February.
“Furthermore, improvement in Australian economic data together with a more optimistic tone from the central bank have helped AUD to return to pre-Trump-win levels. We recognise the support for AUD from improved global economic conditions and rising commodity prices. However, we still think that the RBA wants to limit the upside in AUD and is ready to soften its tone in case the exchange rate appreciates excessively. Also, we see relative monetary policies supporting USD versus AUD this year.”
“We keep our forecast unchanged, expecting weakness on a 1-6M horizon (as the US administration reveals more details of its economic plan) and longer-term stabilisation in AUD. Our 1M forecast is 0.75, 3M forecast 0.73 and 6-12M forecasts 0.74 and 0.75 respectively.”