The Australian dollar failed to cash in on USD weakness and commodity currency momentum at the start of the year. Economists at ING expect the AUD/USD pair to hover around the 0.72 level over the next motnjs.

Watch the China risk

“China’s zero-Covid policy and the implications for the region’s growth outlook should continue to put a cap on any sustained rally in AUD.”

“Domestically, we expect some re-pricing of RBA rate expectations, as 100bp of tightening currently priced in by yearend appear way too aggressive.” 

“We expect AUD/USD to stabilise around 0.72 in the coming months, but the balance of risks is skewed to the downside.”