AUD/USD set for a bullish move in the second half of the year – Mizuho

The AUD/USD pair traded around 0.7700 in March before moving heavily toward the end of the month. In the view of economists at Mizuho Bank, though April will see confirmation that Australia’s fundamentals are recovering firmly. The aussie’s downside will probably edge lower with an eye on rising US long-term interest rates and the spread of COVID-19, for example.

AUD/USD to continue adjusting in April

“A second A$100 billion bond buying program will be launching mid-April. The RBA holds over 60% of all 3-year Australian government bonds (the target for purchases under the yield curve control program). It has managed to keep the 3-year government bond yield around its goal of 0.1% by pushing borrowing costs 100bps below the regular rate of 25bps. However, with Australia recovering swiftly from the covid slump, expectations for tapering are increasing and there is growing anticipation for rate hikes. As such, the Australian dollar will remain bullish from the middle to the end of the year.” 

“US interest rates have risen and this has roiled stock prices, while Europe is struggling with a new COVID-19 wave and the slow rollout of vaccines, so the greenback will probably continue to undergo a comprehensive rise, with the AUD/USD pair likely to remain in adjustive mode in April.” 

“The Biden administration has announced details of an infrastructure plan costing more than $2 trillion and taking place over eight years. If US bond yields subsequently rise, the US dollar will be bought over a prolonged period, with this also weighing down the AUD/USD pair’s movements.”