Economists at Westpac continue to expect the AUD/USD pair to trend higher as positive fundamentals suggest fair value is currently at 0.78. The aussie is set to hit the 0.75 mark in 2020 while is expected to climb to 0.80 in 2021 as the world recovers.
Key quotes
“Our fair value model continues to signal an undervalued AUD. We currently assess AUD/USD fair value at 0.78 and anticipate that it will hold around that level over the remainder of this year – which is still comfortably above our end 2020 target of 0.75. Incorporated in this base case is a view that the iron ore price may fall back from $120 to $110 by end-2020.”
“Other factors which are likely to continue to support AUD are the likely ongoing boosts to risk – with firm commitments by central banks, including the RBA, to support liquidity and demand; ongoing government stimulus; improving news around developments with vaccines and Australia’s ongoing current account surplus which we expect to register at $46B for 2020 including $10B for the December quarter.”
“From a contraction in 2020 of around 3.8% we expect global growth to lift to 5.8% in 2021. We see relatively more rapid recoveries in the Asian region boosting their currencies which in turn will provide support for AUD.”
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