We have significantly revised down our forecast for the AUD/USD by year’s end from USD0.73 to USD0.69.
We expect extreme volatility in the AUD/USD around that USD0.69 track as the supercharged USD is challenged and the efforts from the Chinese authorities to revitalise the Chinese economy continue apace.
Uncertainty about the level and timing of the peak in central bank interest rates (especially the FOMC), and uncertainty about the global inflation profile to be the dominant headwinds for risk currencies like the AUD.
In that regard we have recently lifted our forecast for the peak in the federal funds rate to 4.125% from 3.375% and confirm our forecast of a peak in the RBA cash rate of 3.35% which has been somewhat higher than most analysts.
- Westpac
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