AUD/USD will weaken towards 0.61 – CIBC

Economists at CIBC Capital Markets expect the AUD/USD pair to move lower in the coming weeks.

Mortgage resets will weigh on the Australian economy much sooner than in the US 

Mortgage resets, a frequent topic of contention in Australian newspapers, will weigh on the economy much sooner than the US economy, and we have previously noted that US mortgages don’t need to be renegotiated at any point from initiation to the end of the mortgage term (in contrast to Australian and Canadian mortgages). That means that the US economy will be able to better weather a ‘higher for longer’ stance than Australia.

Despite those structural differences in the mortgage market, the US curve is still more aggressive in pricing policy rate cuts relative to the Aussie curve. Once the futures more accurately price the Australia-US housing divergence, we think AUD/USD will weaken towards 0.61 by Q4.