Aussie Faces Weak Demands Both Home and Abroad

Australian economy appeared sluggish in 2019. Stagnant wage growth and debts piling up have made consumers significantly reduced their spending, and though Reserve Bank of Australia had lowered the interest rate by 0.75% through 3 rate-slashes, private consumption remained low. Government stimulus had hardly any help, and billions of tax refund went into savings rather than spending.

The weak economy is increasingly creating a headache for the country‘s Prime Minister Morison, while the raging wildfire recently will definitely weigh on Australian’s growth in the first quarter of 2020, particularly hurting economic activities in tourism, regional trade, housing construction and agricultural production. A conservative estimation is the fire will cause a loss worth of over 5 billion Australian dollars.

AUD/USD‘s target range for Q1, 2020 will fall between 0.66 and 0.71, while target for Q3 will likely be 0.70. Global trade volume continues to drop and economy remains weak, while forex price has been soft as well in 2019. All these will significantly affect Australia’s economy.

Meanwhile, the RBA is sticking to overall easing in its fiscal policies. Minutes of December‘s monetary policy meeting suggests that the policymakers will reassess the monetary policy to be taken after an economic outlook on February’s meeting, and there‘s a great possibility for further rate cuts. Market estimates there’s a 50% likelihood for RBA to lower interest rate, while more rate cuts may be coming in mid-year 2020; so AUD/USD is facing great pressure during the first half of the year.