Aussie dollar set to rebound

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The Australian dollar is set to rebound according to one analyst at the expense of the US dollar which is expected to weaken as the US Federal reserve holds off on raising interest rates any further.

Although the Australian economy has some problems of its own, this factor is not expected to outweigh issues in the US which should generate interest in the Aussie dollar and will be the catalyst for the rebound.

“A dovish US Federal Reserve, a likely global economic growth recovery in the second half of the year and thawing US-China trade tensions should outweigh domestic risks for Australia such as the worsening housing slump” said Julio Callegari from JPMorgan Asset Management

"We already saw a significant slowdown in the US, that's much more favorable to emerging market and the cyclical currencies." He added.

Another catalyst for the recent loses in the Australian dollar is the growing expectation that the Reserve Bank of Australia will need to cut interest rates this year in order to breathe some life into the economy, but some say this is not a done deal and if the jobs market holds up a rate cut may be delayed or not happen at all.

"The key issue for the RBA is the labor market and Lowe noted that the data on this front have been encouraging," says Elias Haddad, analyst from the Commonwealth Bank of Australia

"We don't expect the RBA to be too concerned about the soft Q4 GDP outturn as long as slower growth doesn't translate into slower employment growth." He added.

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