National Australia Bank (NAB) has revised its year-end AUD/USD forecast higher to 0.70, citing a prolonged bear market for the US dollar. The bank’s FX strategy team expects the pair to stabilise around 0.65 through mid-year, before gradually rising toward 0.67 by December.

NAB highlighted the shifting interest rate differential between Australia and the United States as a key driver of the currency pair.

NAB expects the Reserve Bank of Australia to cut rates by 50 basis points at the May meeting

• followed by additional 25bp cuts in July, August, November, and February

While the path higher for the AUD may be gradual, NAB believes broad USD softness and stabilising risk sentiment will provide tailwinds into year-end.

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