We last revised our AUD forecasts in June, lowering our end-2013 estimate for the AUD/USD rate to 0.88 and to 0.83 for end 2014. While still in essence a US dollar call, back then our view was that the RBA easing cycle was likely to be complete with a move down in the Cash Rate to 2.5% and with a tightening cycle potentially commencing late in 2014. We now envisage at least one further rate cut in this cycle (to 2.25%) with risk skewed to an even lower cycle end-point – a view supported by the economic projections contained in the new RBA Statement of Monetary Policy – and with no tightening expected before 2015 at the earliest. This is part of the justification for now forecasting a somewhat deeper and faster AUD depreciation path. We now envisage an end-2013 rate at 0.86, and a move down to the 80 cent level by the end of 2014
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