JP Morgan still favours the Australian dollar despite the difficult beginning to the year for AUD:
- “price action has admittedly disappointed thus far into 2024”
JPM lay out their reasoning (this in summary):
- Reserve Bank of Australia rate hike possibility remains “live” in the near term due to the outlook for still high inflation (contrasting with likely cuts from, the Federal Reserve, European Central Bank, Bank of England)
- The threshold for a cut from the RBA “should prove higher than for other G10 central banks”
- expect the RBA will be one of the last DM central banks to begin cutting rates
- fiscal policy should be supportive, tax cuts coming which will “therefore be a tailwind for growth (and inflation), allowing the economy to sustain higher interest rates than previously”
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In the near term the stock market collapse in China is not helping AUD:
This article was written by Eamonn Sheridan at www.forexlive.com. Source