CBA has cut its forecasts for the Australian dollar – central banks key

Commonwealth Bank of Australia forecast for AUD/USD at the end of 2024 is 0.69, down from 0.71 previously.

• March 2025 forecast is 0.71, from 0.73 previously.

CBA cite the interest rate gap, high U.S. bond yields supporting the USD while the Fed remains wary of high inflation and thus of rate cuts:

• “One obstacle to large gains in AUD/USD is the large negative interest rate differential between Australia and the U.S.”
• AUD is well past cyclical lows, though, and the “next big move in AUD/USD will be up rather than down.”
• China economic revival, and more broadly economic bounce globally, will support AUD

CBA make particular mention of a key risk to their forecast:

• “One upside risk to our AUD/USD forecasts is if the Reserve Bank of Australia increases the cash rate. Until recently, financial markets were partially pricing a rate hike by the RBA before the end of the year. While we disagree with the argument for rate hikes based on our economic forecasts, if we are wrong and the RBA increases the cash rate at least once, AUD/USD could be higher than our new forecasts”