AUD/USD Monthly Fundamental Forecast December 2013

Outlook and Recommendation

The AUD/USD closed the month below its average at 0.9110 down almost 4% for the month as traders moved from currencies to equities. Glenn Steven’s RBA Governor added the possibility of intervention to his tool box this month, which sent the Aussie tumbling.  The Chinese Communist Party’s Third Plenary Session was held in November with discussion centered on economic reforms. While the proposed plan lacks details and timelines, it emphasizes the new leadership’s commitment to transfer the economy towards a more market oriented structure. Accordingly, it was well-received by market participants. The official communique stated that the market will play a “decisive” role in allocating resources in the economy by 2020.

Accommodative monetary conditions are set to remain in place in Australia in the coming quarters. Following the November 5th policy meeting, the Reserve Bank of Australia (RBA) stated that it would not close off the possibility of reducing rates further should the economic recovery require further support. At the same time, however, the RBA highlighted that a “substantial degree of policy stimulus” had been implemented, and its potential effects on the economy require continued vigilance. The cash rate is at 2.50%, with the most recent reduction having taken place in August. Barring a significant deterioration in domestic conditions, Analysts assess that the easing cycle has now reached its bottom. The inflation outlook remains manageable, with consumer price inflation remaining within the central bank’s 2-3% target range. The AUD is expected to climb after the RBA meeting the first week of December.

FxEmpire provides in-depth analysis for each currency and commodity we review. Fundamental analysis is provided in three components. We provide a detailed monthly analysis and forecast at the beginning of each month. Then we provide more recent analysis and information in our weekly reports and we provide daily updates and outlooks.

Central Bank Name: Reserve Bank of Australia

Date of next meeting or last meeting: December 3, 2013

Current Rate: 2.50%

Economic events for the month of February affecting AUD, JPY, NZD and USD