AUD/USD: Forecasts lifted by improving risk sentiment – MUFG

Analysts at MUFG Bank explained the Australian dollar outlook improved on risk sentiment based on vaccine news. They forecast the AUD/USD pair at 0.7500 by the end of the first quarter of 2021 and at 0.7700 by the end of the third. 

Key Quotes:

“The Australian dollar surged in November in response to the positive news on the probable roll-out of vaccines that could now come sooner than originally expected.”

“The election of Joe Biden in the US has further reinforced the positive global growth outlook with the years of uncertainty in relation to global trade wars under President Trump possibly behind us. China may benefit most from this which is helping fuel renewed investor demand in Asia as a whole.”

“The RBA in November added to its QE program with an explicit aim to dampen loner-term yields which may temper demand for fixed income from Japan but we do not see QE as driving yields lower – global reflation will be more important and if the COVID vaccines are rolled out as planned we see yield providing AUD support despite the RBA action. We are adjusting higher our AUD forecast profile to reflect the positive news on vaccines and US politics.”