AUD/USD pair likely to trade around 0.80 by end-2018, says Lloyds Bank

The Australia dollar has rebounded after falling to a four-month low below 0.7350 in early May. A combination of resilient domestic data and an encouraging external backdrop has underpinned the Australian dollar, note Lloyds Bank in a research report. The Australian labor market continues to tighten and the trade balance indicates a healthy surplus. In spite of this, the Reserve Bank of Australia kept its key interest rate on hold at 1.5 percent in July.

On the contrary to other central bankers, Governor Lowe did not use the complications that might arise from a stronger Australian dollar in the ongoing economic adjustment. Given this stance, it appears unlikely that the RBA might hike its benchmark interest rate in 2017, with the market assigning a 20 percent probability.

On the contrary, the U.S. Fed continued with its tightening cycle at the last FOMC meeting. According to Lloyds Bank, the stabilization of important commodity prices, less concern over weaker economic data in China and buoyant market risk sentiment should permit the currency to extend its recent rally.

“We see AUD/USD rising to 0.80 by the end of this year”, added Lloyds Bank.

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