CIBC Research discusses AUD outlook and flags a scope for a bullish u-turn in the medium-term.
"In recent years the primary driver of the Aussie dollar has changed from commodity prices to interest rate spreads, but the general direction the currency was travelling remained the same – down. That could be due to the fact that it has been supply, rather than demand, issues that have been largely propping up prices for its key commodities," CIBC notes.
"However, going forwards the Aussie could do a U-turn and see an appreciation. Interest rates are already very low, suggesting little further room for spreads to move more in favour of the US. Meanwhile an improvement in global sentiment could be positive for commodity prices for the right reason: higher demand rather than limited supply," CIBC adds.