Economists at Westpac have boosted the AUD/USD end-2020 forecast from 0.72 to 0.75 while the 2021 scenario of a further solid boost to AUD remains intact with the resulting forecast for the aussie to reach 0.80 by end 2021.

Key quotes

“Our fair value model continues to signal an undervalued AUD. We currently assess AUD/USD fair value at 0.78 and although our base case is that the iron ore price may fall back from $120 to $110 by year’s end with fair value holding at 0.78 it will still be comfortably above our end 2020 target of 0.75.” “Other factors which are likely to continue to support AUD are the likely ongoing boosts to risk – firm commitments by central banks 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 $46 billion for 2020 including $10 billion for the December quarter.”

For 2021 we expect a significant recovery in global growth

“We forecast that GDP will lift by 2.8% in the December quarter supported by the reopening of the Victorian economy and ongoing “progress” in the other states. For 2021 we expect a significant recovery in global growth. From a contraction in 2020 of around 4%, we expect global growth to lift to 5% in 2021. We see relatively more rapid recoveries in the Asian region boosting their currencies which in turn will provide support for AUD.”

AUD/USD forecasts lifted to 0.75 end-2020 and 0.80 end-2021 – Westpac