AUD/USD: Dollar weakness likely to boost the pair - Commerzbank

Analysts at Commerzbank, point out that the recent interest rate speculation put the Aussie under pressure. They see China as the most significant risk for the AUD and consider US dollar weakness will likely contribute to boosting AUD/USD.

Key Quotes: 

“The recovery of the Australian economy and thus of the AUD will depend largely on the extent to which concerns about the Chinese economy prove to be true.”

“We are optimistic that there will not be a noticeable slump in Chinese economic growth. Those responsible in Beijing have already reacted to the weaker momentum and initiated both monetary and fiscal stimulus measures to support the economy. We therefore expect the economy to stabilize in the coming months. This should significantly dampen speculation about interest rate cuts in Australia, after which the Australian dollar should recover.”

“We forecast a recovery of the Australian currency, especially against the US dollar, which is however primarily attributable to a weak greenback rather than a strong AUD. Since the US Federal Reserve is unlikely to raise its key interest rate any further, the US dollar appears overpriced and should therefore depreciate in the course of the year.”

“We do not believe that interest rate cuts by the RBA will be necessary. However, like other central banks, it will maintain a cautious stance in view of global economic concerns and maintain its low interest rates for the remainder of this year. We therefore do not expect monetary policy to provide any significant impetus for AUD exchange rates in the medium to long term.”