CIBC on the Australian dollar, forecasting 0.68 in Q3 2023 & 0.69 in Q4.
CIBC cite:
- After surprising markets with rate hikes in May and June, RBA Governor Lowe has remained hawkish in recent speeches as he focuses on the problem of low Australian labour productivity. We think there are upside risks to the policy rate, given the persistence of high unit labour costs and high core CPI relative to other developed markets.
- In the near-term, there are slight headwinds from the USD side, which should cap short-term AUD/USD strength, but we still expect slow appreciation over the forecast horizon due to the above factors.
- External influences on Australia have been negative of late with declining global manufacturing demand and disappointing Chinese data. However, we still think that there are likely to be spillovers from higher Chinese incomes – including for Australian tourism. Further, should Chinese credit conditions ease, there is likely to be an increase in commodity demand over time.