AUD/USD likely to move higher towards 0.77 by 2016-end

At the end of April, the AUD/USD pair had reached a new year-to-date high of 0.7835. After reaching that level, the pair was under continuous pressure until May-end, dropping nearly nine percent to a low below 0.7150. This downward move was mainly due to rising likelihood of a near term US policy tightening during this period.

But the latest US payrolls report ended the likelihood of the US Fed hiking rates in June that set off a sharp move higher in the currency pair.

The rebound in the Australian dollar extended after the Reserve Bank of Australia kept its interest rate on hold during its latest monetary policy meeting. The AUD/USD pair is currently at a mid-range level around 0.74 due to the convergence of policy expectations. The latest data for Australia has been robust, with the jobless rate at 5.7 percent and the first quarter economic growth at 3.1 percent on an annualized basis.

“While inflation remains muted, and poses a risk of additional policy loosening from the RBA, we believe economic data will remain robust and forecast AUD/USD to climb towards 0.77 by end-2016,” said Lloyds Bank in a research report.