Last week, AUD/USD fell sharply, touching 0.71, the lowest level since November 2020. Economists at Westpac confirm the key themes for a rising aussie, but have lowered their expectations.
A Rising AUD through to the end of 2021 and 2022
“Our own central view is that while the starting point for the December quarter for AUD/USD might be even lower than our 0.72 forecast, we expect that Australia’s pandemic performance during the December quarter is likely to surprise markets to the upside.”
“The speed of vaccination rates; the incentives to vaccinate out of the current lock downs; and the imminent lift in vaccine supplies is likely to see Australia vault to near the top of the international ‘tables’ for vaccination ratios during November where up to 90% vaccination remains a possibility.”
“Westpac is forecasting Australia’s growth rate to lift from 2.4% in 2021 (including the 2.6% contraction in the September quarter) to 5.0% in 2022.”
“We have lowered our world growth forecasts in 2021 from 5.7% to 5.5% and in 2022 from 4.7% to 4.5%. Those revisions still entail only a modest downward revision for growth in China. This increased uncertainty over the outlook has flattened and extended the profile for the AUD/USD from a 0.82 peak in 2022 to a peak in 2022 of 0.78.”
“But, as risks, specifically around the pandemic, dissipate further, including in less developed economies, in 2023, we expect AUD/USD to reach 0.80.”
“The end point for the aussie in 2021 has been lowered from 0.78 to 0.75 also reflecting the heightened uncertainties associated with delta and our lower starting point.”
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