The RBA has been one of the latest central banks to lower interest rates on February 3. It cut it’s Cash Target Rate with 25bp. from 2,5% to a record low 2,25%. The reaction in the spot market was relatively limited and reverted after one day to pre-cut levels around 0,7800 where it still is today.
The one-year forecast in the January Consensus report was at 0,7770 and in the upcoming February report it will be just below 0,7500. So forecasters are still looking for a lower AUD/USD from here.
Danske sees the pair at 0,75 in one month and at 0,73 in one year. In their February 3rd update they state: “With the pro-active decision to cut the cash rate target, RBA has clearly entered the global currency battlefield and has showed its willingness to combat too strong an AUD” and believe that another 25bp rate cut in March will bring the pair to 0,75 then.
Rabo holds a somewhat similar view with an expected rate cut in the short term and a lower AUD/USD at 0,75 in three months. Only they see the pair at 0,70 in one year. Main reason is that the nominal exchange rate may have fallen sharply but the effective exchange rate has not yet fallen that much as the terms of trade have deteriorated as well in the meantime.
Scotia is similar bearish on AUD/USD, forecasting 0,76 at the end of 1Q15 and 0,73 at the end of this year. Though they do not anticipate another rate cut in the near term and while they hold a balanced view on the domestic economic situation they feel that “Ongoing global uncertainty and asset reallocation moves together with China’s slowing economic growth trajectory continue be reflected in the value of the Australian dollar. The currency is vulnerable to external shocks and capital outflows due to declining commodity prices and Australia’s current account deficit.”
In general providers to the February FX Prospect Consensus report are forecasting a flat or declining exchange rate profile for AUD/USD this year.