One of the reasons the Australian dollar may have strengthened is because the Fed gave no surprises, and kept to their earlier plan to lift rates 3 more times next year. The question is still up in the air whether 3 rate rises is possible as it was shown anything could happen, and after Tuesday’s upset election results where the democratic candidate Doug Jones triumphed over Republican candidate Roy Moore which threatens to derail US President Donald Trump’s tax plans.
If Trump’s tax policy does indeed fall by the wayside the US dollar is expected to take a huge hit as most of its recent gains are connected with the smooth passage of tax reform.
So with a maximum of 3 hikes next year from the Fed (or less as many are predicting) the main driver of the Australian dollar now will be the local economy and more importantly economic data.
Job figures released earlier today from Australia came in well above expectations which caps off a stellar year for the jobs market while consumer inflation figures which were also released came in at 3.7 percent which is well within the Reserve Bank of Australia’s target to begin hiking rates.
If the above figures are anything to go by the RBA will need to join other countries such as the US, Canada and the UK who are currently raising rates or on the verge of doing so which according to some is going to see the Aussie dollar rally next year.
“Looking into 2018, we see the Australia dollar climbing, as we expect it to get support from a lift in global growth, which is expected to support commodity prices, and we expect the RBA to lift the cash rate in 2018,” noted HSBC chief economist Australia and New Zealand Paul Bloxham.
Mr boxom is one of the more bullish analysts on the Australian dollar and predicts the Aussie dollar will jump 20 percent from current levels as the RBA begin to lift rates next year.
“We expect the Australian dollar to head towards 90 US cents,” Mr. Bloxham added.
This article was written by FIBO Group analyst Andrew Masters.
This article was originally posted on FX Empire
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