The Australian Dollar’s (AUD-USD) price action through March has been fairly expansive compared to its average swings. AUD-USD has moved from the 0.6500 value area to 0.6600, and analysts at the National Australia Bank (NAB) think it could go even higher in 2024. According to NAB’s analysis, there’s an optimistic outlook for the Aussie dollar, with expectations of it climbing above 0.7000 in the second half of 2024.
This anticipated appreciation is linked to a potential weakening of the U.S. dollar, influenced by the Federal Reserve’s move to ease interest rates in June, contrasted with a more cautious approach from the Reserve Bank of Australia (RBA). Additionally, a forecasted uptick in global growth by 2025 could bolster the Aussie dollar, with projections suggesting it could reach 0.7800 by the fourth quarter of 2025.
Recent Economic Data Paints a Mixed Picture
Recent economic data paints a mixed picture for the Aussie dollar. The RBA’s decision to maintain steady interest rates while abandoning its tightening bias increases volatility and gives FX traders an increased sense of uncertainty. Meanwhile, labor market reports, wage growth data, and the latest purchasing managers indices (PMIs) offer a complex view of economic health, with PMIs indicating divergent trends in manufacturing and services and the labor market showing unexpected developments.
One piece of fundamental data likely to influence the RBA’s decision on future interest cuts is Fitch Ratings’ report on rising mortgage defaults. The number of defaults is the highest since the pandemic’s onset in 2020. Combined with the impact of persistent inflation and interest rate adjustments on borrowers, it’s no surprise that analysts are expecting a potential rate cut by August.