AUD/USD to appreciate to 0.81 by end-2017 – Lloyds Bank

According to the analysts at Lloyds Bank, after following a period of consolidation, AUD/USD pair should appreciate to 0.81 levels by end-2017.

Key Quotes

“Despite selling-off in recent weeks, the Australian dollar remains one of the better performing developed market currencies this year. It continues to be underpinned by external dynamics, including the positive trend in the price of base metals, stability in China and the relatively benign risk environment. Against this backdrop, February’s trade surplus rebounded to a near record A$3.6bn.”

“However, other domestic data have softened, raising concerns over the outlook. The latest Australian labour market report showed a jump in the unemployment rate to 5.9%, while retail sales surprisingly declined. Having left interest rates unchanged at 1.50% in April, RBA Governor Lowe has adopted a more ‘dovish’ tone. He cited the weakness in the labour market, growth in consumer borrowing and exchange rate strength as reasons to be cautious with regard to policy tightening.  In the US, following March’s 25bp increase in the Fed funds rate, the FOMC have indicated they are likely to raise interest rates twice more in 2017, with US yields generally falling as a result. Following a period of consolidation, we see AUD/USD appreciating to 0.81 by end-2017.”