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The Bloomberg consensus points to AUD/USD at 0.72 at the end of the year. By contrast, Rabobank’s forecast suggests scope for a move back towards 0.68 on a three-month view. 

Key quotes

“We are more constructive on the outlook for the USD than the market consensus. It is likely that we are also more concerned about the prospects for the Chinese recovery going into the end of the year. In view of the economic slack in the Australian economy, it is possible that policy makers will want to shake off the reputation of being the least dovish central bank in the G10 in the coming months. Layered on top of these arguments are concerns about the economic impact of the drawn out lockdown in Melbourne and from the testy relations between Canberra and Beijing. All these factors could conceivably weigh on AUD/USD in the coming months.”

“The greenback will remain a primary safe-haven currency on any sharp drop in risk appetite. The USD is the only dominant currency on the global payments system. The fact that so many market participants need USDs to carry out their day to day business means that if risk aversion were to spike, the USD is likely to follow. Although the market has been appeased by signs of economic recovery around the globe in Q3, it is our view that Q4 could be troublesome.”

“The combination of slower US growth in Q4 and continued US/China tensions is likely to impact China’s recovery. Insofar as Europe is already facing reports of a resurgence in COVID-19, it is likely that disappointment about the global economic outlook could become more broad based. All of these factors would undermine market confidence and have the potential to support the USD.” 

“Even though Australia managed a small current account surplus last year, the AUD’s links with commodities means that it is likely to remain sensitive to broad levels of risk appetite. If the global economic recovery stalls in Q4, commodity prices and the AUD are set to come under pressure.”