The Australian Dollar to US Dollar (AUD/USD) currency pair is experiencing downward pressure in the wake of Australia’s soft inflation data, prompting analysts at Commerzbank to assess the outlook for the Aussie.
The recent inflation data reveals a halving of the quarterly increase from the previous quarter, registering at 0.6% quarter-on-quarter, aligning with the Reserve Bank of Australia‘s (RBA) inflation target range of 2-3%. The market’s response to these figures indicates an increased likelihood of more substantial rate cuts, contributing to the decline in the Australian Dollar against the US Dollar.
Analysts suggest that the RBA may adopt a more dovish tone in its upcoming statement, amplifying the downward pressure on the Australian Dollar, particularly with lower inflation forecasts on the horizon.
The crucial factor for future developments will be the next set of inflation figures, particularly those for the first quarter of 2024. The outcome of these figures will play a pivotal role in shaping future actions. Until then, the AUD/USD pair is expected to be more influenced by developments on the US side than usual.
Analysts at Commerzbank anticipate a potential mild recession in the US, coupled with the initiation of a cycle of rate cuts by the Federal Reserve in the coming months. Should this scenario unfold, it is anticipated that the AUD/USD pair could witness a resurgence to much higher levels. The interplay of economic indicators, central bank decisions, and global economic conditions will continue to shape the trajectory of the AUD/USD exchange rate in the near term.