Danske Bank: Global QT, Weaker China Boost US Dollar

Analysts at Danske Bank forecast the AUD/USD pair at 0.67 in a month, at 0.67 in three months and at 0.66 in six months. They point out the Australian dollar could receive some support from a tight supply of several commodities.

Key Quotes:

“The persistent global inflation has increased the risk of more aggressive tightening especially by the Fed, which has consequently amplified recession odds and weighed on broad commodity FX, including AUD.”


“The Reserve Bank of Australia (RBA) hiked rates by 50bp in its September meeting, and will likely follow with another similar hike next month. However, in the current environment, the tighter monetary policy also means higher risk of a recession for Australian economy, and thus AUD will continue to gain only modest support from the rate hikes.”

“The combination of tightening global financial conditions and weakness in China continues to support broad USD vs. commodity exporters such as AUD. However, the persistent tight supply of several commodities and especially LNG, where Australia is a key global producer, will likely offer support for AUD vs. commodity importers, such as EUR.”