AUD likely to surpass USD in 2018, says Commerzbank

Currently, the AUD/USD pair is being dominated by the USD side of things in view of the Reserve Bank of Australia’s wait and see stance. But the initial euphoria after the election of Donald Trump as the U.S. President has calmed since. In January, the Australian dollar has been able to recover most of its looses against the U.S. dollar recorded since early November, noted Commerzbank in a research report.

Although Trump’s monetary policy’s long term success is still uncertain, the U.S. inflation rates’ momentum is expected to be enough to justify a more aggressive rate rise speed for the U.S. Fed in 2017 than was the case in 2016.

This is expected to underpin the U.S. dollar mainly in the first half of 2016 and indicates towards temporarily lower AUD/USD levels. But increasing commodity prices might avert a marked drop in AUD/USD pair. In 2018, there is scope for first rate rises by the Australian central bank. This suggests that from then on the Australian dollar will increasingly be able to exceed the USD, stated Commerzbank.

As the euro is expected to gain from the end of ECB’s quantitative easing program in the second half of 2017, the EUR/AUD pair might just start reflecting the central bank’s more restrictive monetary policy in 2018. Until then the EUR/AUD pair is expected to move sideways, added Commerzbank.