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At the domestic level, however, inflation remains low, and will stay low for some time. As reported in the November Statement on Monetary Policy, the RBA expects inflation to close the year still below target, at 1.5%, and then to converge back towards the target rate in the course of 2017, at 1.5-2.5%.

This suggests that the central bank has still not definitively closed the door on a potential rate cut. Therefore, even in the prospect of a more robust fed funds rate hike next year than this year, we confirm our expectations for a weakening of the Australian dollar in the near term, towards AUD/USD 0.73-0.70 on a 1m-3m horizon.

We confirm our expectations for a gradual recovery of the AUD subsequently, in function of the expected improvement of the growth/inflation scenario in 2017-18, as prospected by the RBA.

USD, EUR, GBP, JPY, AUD, Outcome, Italian Referendum, Fundamental Analysis, fx trader, forex chart-2

USD, EUR, GBP, JPY, AUD, Outcome, Italian Referendum, Fundamental Analysis, fx trader, forex chart-3USD, EUR, GBP, JPY, AUD, Outcome, Italian Referendum, Fundamental Analysis, fx trader, forex chart-4

USD, EUR, GBP, JPY, AUD, Outcome, Italian Referendum, Fundamental Analysis, fx trader, forex chart-5USD, EUR, GBP, JPY, AUD, Outcome, Italian Referendum, Fundamental Analysis, fx trader, forex chart-6Source: Thomson Reuters and Intesa Sanpaolo elaborations

Asmara Jamaleh
Economist – Forex Markets
Intesa Sanpaolo Research Department

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