Rabobank has issued a forecast regarding the Australian dollar, predicting that it will encounter significant challenges in the near term before ultimately resuming its longer-term upward trend. The bank anticipates that a short covering in favor of the US dollar may occur over the next one to three months, potentially pushing the AUD/USD pair back down towards the 0.65 mark. However, Rabobank remains optimistic, setting a 12-month target of 0.89 for this exchange rate.
The bank’s outlook on the Australian dollar is closely tied to the trajectories of monetary policy at the Reserve Bank of Australia (RBA) and the Federal Reserve. Despite the release of solid second-quarter GDP data, Rabobank predicts that the RBA will initiate a series of rate cuts, totaling 25 basis points at meetings scheduled for November, February, and May. This move is expected to ease the monetary policy from its current restrictive stance.
In stark contrast, the Federal Reserve is projected to implement rate reductions amounting to 125 basis points by the end of 2026. Currently, markets are only estimating a reduction of 43 basis points from the RBA over the next six months, while anticipating around 88 basis points of easing from the Fed.
Rabobank suggests that if traders are underestimating the potential scale of cuts by the RBA or overestimating risks associated with the Fed’s policy moves, the US dollar could gain strength against the Australian dollar in the short term. This nuanced perspective indicates that market participants need to closely monitor developments in both countries’ monetary policies to understand future currency movement.
