14 July, AtoZForex.com, Lagos – Last week, the RBA rate statement was released, as the central bank chose to maintain its rate at 2.00%, having already cut it twice this year. The board insists that information on economic and financial conditions over the period ahead will inform the Board’s assessment of the outlook and hence whether the current stance of policy will most effectively foster sustainable growth and inflation consistent with the target.
Looking at the numbers as well, slightly better employment numbers were recorded as unemployment rate fell to a one year low. The Aussie has been in a downward spiral for many months now as the economy suffers a blow from the falling in mining activities, coupled with economic issues experienced by its largest international partner, China. Also, the Reserve bank of Australia has consistently reiterated its desire for a weaker AUD as the strength of the currency is seen to be stemming growth.
Despite these factors and the long standing fall in the currency value, the Swiss mega bank- Credit Suisse opines that a number of factors suggest that further AUD weakness is still on the cards. This is dependent on both external and internal factors like development of China as well as policy measures from other major central banks.
Highlighted below are the points given in support of their argument:
“(1) Though the situation in Greece remains dynamic, lingering uncertainty could further delay Fed hiking expectations, pressuring the RBA’s hope for a USD-driven move lower in AUDUSD.
(2) If the SNB, BoJ or ECB ease policy further, there is a material chance that the RBA follows suit – as one of the key reasons the RBA cut rates back in February was to prevent a relative tightening of monetary conditions.
(3) Iron ore prices have fallen nearly 25% in the last month.
(4) Chinese equity sentiment remains under significant pressure despite multiple support attempts by the government.
(5) Finally, AUDUSD positioning is much cleaner than months prior,” CS clarifies.
Credit Suisse AUDUSD Forecast
- In the medium term (3-month window), the bank targets 0.73
- In the long term, (12 months window), the bank targets 0.70