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AUD/USD: Recovery potential for the Aussie over the course of the year – Commerzbank

After a brief roller coaster, the AUD/USD pair is trading at the same level as at the end of November. Commerzbank economists analyze the pair's prospects.

RBA caution provides support

We continue to believe that the AUD has the potential to recover in the coming months. Rate cuts are likely to start much later than in the United States. The RBA should have room to do so, given developments in the real economy. Although economic growth is slowing, a recession is likely to be avoided. This difference in monetary policy should ensure upside potential for AUD/USD until the end of the year.

Of course, the RBA could also cut rates sooner than expected, which poses a significant risk to our forecasts. In particular, the labor market must be taken into account. Although a slowdown in the labor market has recently been observed, albeit from very strong levels, recent statements from officials suggest that it is not yet enough to justify earlier rate cuts. However, it is something that will have to be monitored in the coming months.

However, by the end of the year at the latest, sentiment should change. Indeed, our economists now foresee only a slight period of weakness in the US economy, followed by a fairly strong rebound. Consequently, the Fed is likely to only cut interest rates slightly next year, contrary to market expectations, which should benefit the dollar. As a result, we have slightly lowered our AUD/USD forecast for 2025.

Source: Commerzbank Research

Source: Fx Street

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