After a brief roller coaster ride, AUD/USD is now trading at the same level as at the end of November. Economists at Commerzbank analyze the pair’s outlook.

Cautious RBA provides support

We still believe that the AUD has the potential to recover in the coming months. Rate cuts are likely to start much later than in the US. And the RBA should have the room to do so, given developments in the real economy. Although economic growth is slowing, a recession is likely to be avoided. This difference in monetary policy should ensure upside potential for AUD/USD until the end of the year.

Of course, the RBA could also cut rates sooner than expected, which is a significant risk to our forecast. In particular, the labor market needs to be kept in mind. While we have seen a slowdown in the labor market recently, albeit from very strong levels, recent statements from officials suggest that this is not yet enough to warrant earlier rate cuts. Nevertheless, this is something to keep an eye on in the coming months.

By the end of the year at the latest, however, sentiment should turn around. This is because our economists now expect only a slight period of weakness in the US economy, followed by a fairly strong rebound. Accordingly, the Fed is likely to cut interest rates only slightly next year, contrary to market expectations, which should benefit the USD. As a result, we have slightly lowered our AUD/USD forecast for 2025