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AUD/USD: Fed’s policy to continue supporting the US Dollar – Danske Bank

AUD/USD: Fed’s policy to continue supporting the US Dollar – Danske Bank

The AUD/USD pair dropped sharply on Thursday and it stabilized slightly below 0.6700 on Friday. According to analysts from Danske Bank, the AUD/USD pair will move lower over the next months. They forecast it at 0.66 in three months and at 0.65 in six months.

Key Quotes:

“Lower-than-expected inflation prints from the US, consequent speculation on Fed possibly easing its monetary policy earlier and the turnaround in Chinese Covid-policies have continued to support AUD/USD.”

“The Reserve Bank of Australia (RBA) hiked rates again by 25bp in the December meeting. While RBA signalled that rate hikes would continue in 2023, markets are pricing around 50% probability of a pause in the hiking cycle amid weakening economy and especially the housing market.”

“We still think that especially the Fed will have to continue tightening financial conditions in early 2023, which supports broad USD. While the worsening Covid-situation is weighing on Chinese economy during winter, the gradual reopening could support Australian export prices going forward. We maintain a modestly downward-sloping forecast profile.”

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Francis Wood

Francis Wood is a Journalist at Flaunt Weekly Covering Business News.

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