Whilst interest rates play a central theme in the future direction of the AUD, improved risk appetites and a bounce in the commodity story are likely to be key factors in shaping the medium term view.

Commodities have endured a rapid decline since mid-2008, which goes some way to explaining the demise of the AUD. However recent data suggests fresh falls in inventories, and with copper prices rallying to a 5-month high, the prospect of China restocking could provide medium term momentum for the AUD.

The near term view of AUD has been strongly linked with global risk appetite. Escalating US policy combined with positive moves from the recent G20 meeting, have fuelled the view that financial markets may be able to right themselves from their ongoing problems, with the knock-on effect likely to be a strong rally in AUD.

While pro-risk sentiment continues to offer opportunity in the near term, unknown variables in the form of US balance sheet stress testing (due at the end of April) and the introduction of the US Financial Stability Program may see some medium term base building before the AUD pushes higher.