In the longer run, we look for AUD/USD to reach new cycle lows over the 6-12 month horizon. Structural issues should continue to drag on the economy, including persistently weak commodity prices and the impact on the terms-oftrade.
"It is currently expected that the income effect to ultimately drive the RBA to cut again in 2016 (to a cash rate of 1.50%). Again, there is some potential for a mildoffset to these pressures in the nearer term from capital inflows", says RBC capital markets.
The RBA's has so far maintained a 'wait and see' approach, leaving the Bank with a more neutral bias, and AU as one of the few 'high yielding' AAA sovereign countries.
"But that support should fade later on the horizon in 2016, as AU yields converge with other safe alternatives", added RBC capital markets.
