Increased fiscal spending by the Australian government and improved economic performance from Asia could push AUD/USD higher in the second half of 2020, according to UBS analysts.
The bank expects AUD/USD to test the 0.71 handle in the June quarter and rise to 0.73 by the end of the year.
At press time, the pair is trading near 0.6865.
Key quotes (Source: The Sydney Morning Herald)
We have turned bullish on the AUD/USD in the second half of 2020 for three reasons.
First, the rates market has already largely priced in another rate cut, and much of the bad macro news is already well known.
Second, and most importantly, we expect the federal government to open its wallet at the May budget and, at the very least, bring forward personal tax cuts. This is critical because we think this raises the bar to the central bank implementing quantitative easing measures, which reduces the risk of a sharp unexpected weakening of the Aussie dollar.
Australia’s current account surplus – having surged to the highest level since 1975 in the September quarter last year – will remain at elevated levels, helping the AUD to stay better bid.
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