AUD/USD: Room to grow towards 0.80 in 2021 – ANZ

According to analysts at ANZ Bank, AUD/USD will likely test 0.80 in 2021 as the aussie will do well on its strong domestic starting point, the country’s pandemic containment, good value and leverage to the global growth cycle.

Key quotes

“2021 is likely to mirror 2020 in one respect: global dynamics will be more important than the domestic story. Greater stability in trade policy and geopolitics should support global trade volumes. Continued progress towards re-opening should boost cyclical asset allocations and portfolio flows biased towards emerging markets and Asia, which will benefit from a lower USD. Accommodative policy settings will keep interest rates at record lows, pushing investors up the risk curve and supporting equities. All of this creates an environment where the AUD tends to perform well.” 

“The headwind created by recent RBA action is likely to dissipate. It has now probably made its final move for some time, joining the rest of the world’s central banks in embarking on a new QE program aimed at suppressing long-end yields. To us, this policy is more about capping strength than driving outright weakness and price action, and the announcement has supported this view.”

“Growth in Q4 looks solid, with Victoria’s reopening providing a tailwind to activity. The substantial fiscal assistance has also allowed the household sector to accumulate a healthy stock of savings. This will help support spending growth as restrictions on activity continue to be lifted.”  

“While the recovery will be incremental and a portion of this story is already priced in, we think the AUD’s undervaluation provides ample room for more improvement into 2021. As such, we’ve set our AUD/USD year-end target at 0.80.”