AUD/USD to drop gradually over the next months – Danske Bank

The AUD/USD pair tested levels under 0.7100 on Monday. Analysts at Danske Bank see the pair at 0.71 on a three-month perspective, at 0.70 in six months and at 0.69 in a year. 

Key Quotes: 

“The rally in commodity prices has supported AUD since late January as broad USD strengthening took a step back. Continuing easing from China is especially supportive for Australia’s key export commodity, iron ore.” 

“The outlook for commodities remains uncertain, as the global recovery and Chinese easing have supported demand, but more aggressive Fed tightening and broad USD strength should limit the rise in prices.”

“The Reserve Bank of Australia ended its QE purchases in February. RBA highlighted the risks of more persistent inflationary pressures, but also noted that near-term rate hikes remain unlikely. Labor market conditions have tightened, but data released so far does not yet point towards a pickup in wage inflation. First rate hike seems likely in H2 this year, but with the very hawkish market pricing, relative rates remain a drag on AUD.”

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