Having held our nerve through the first seven months of 2017 with our long-standing call for the AUD/USD to fall to 70 cents by the end of this year, the ever-diminishing prospects for a significant near-term recovery in the US dollar now forces us to acknowledge that it is now difficult to expect such a steep fall this year.
Next year could still be a very different story, in particular if US rates move up above Australian equivalents, which is the NAB forecast.
But for end Q3, we lift our forecast from 0.73 to 0.78, and for year-end from 0.70 to 0.75.
In 2018, we now suggest a low of around 0.73, from 0.70 previously
I still see the risk of one more spike higher as the Fed disappoints hawks owing to the oil shock hitting inflation and as the tail end of the Chinese stimulus whips through markets.
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
