With US data now looking weaker than many had expected, markets are now pricing in March 2016 as the most likely time for the first rate hike by the Fed. This looks likely to quell some of the US dollar strength in the near term, boosting a range of currencies but also helping commodities that are priced in US dollars.
This could be a boost to Australian exports. The most recent flurry of Chinese PMIs have also improved the very negative outlook on the Chinese economy and it is hoped that the significant monetary easing and fiscal spending this year will improve China’s activity data in Q4.
All these factors have been supportive to Aussie dollar strength, and the most recent Reserve Bank of Australia (RBA) statement severely knocked back the probability of a rate cut in 2015.
We are then left with the possibility of the Australian dollar spending much of the rest of 2015 trading in a $0.70-$0.75 range, which is quite a bit higher than most had previously expected.