Domestic economic momentum will remain a source of strength for the AUD vis-à-vis non-USD currencies. Regarding AUD/USD, the pair is set to stay below 0.70 in the first half of 2023.

Strength against crosses

The RBA wants to remain on the ‘narrow path’ to a soft landing. As a result, we see the cash rate peaking at 3.85% by mid-2023 and staying there for at least a year. This higher-for-longer story is a key tenet of our medium-term upside bias for the AUD against currencies with more aggressive central banks, such as the NZD and GBP, which will face pressure to cut sooner.”

“Decelerating global growth and tighter liquidity conditions will keep a lid on upside potential, but we think a significant degree of this structural story is now priced in. We have the AUD/USD remaining below 0.70 through to June, before broad-based USD weakness helps lift the Aussie and other cyclicals into year-end.”

This article was originally published by Fxstreet.com.Read the original article here.

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