AUD/USD to surge towards 0.74 by September-2021 – UBS

Analysts at UBS continue to expect the AUD/USD pair to trade around 0.71 into the year-end as lower aussie rates and narrower yield differentials between Australian and US government bonds add headwinds to the AUD. A deterioration in the current account is another challenge for the aussie, although price-supportive fundamentals for iron ore and improving risk sentiment are positive for the pair into 2021.

Key quotes

“Lower for longer rates among major central banks pose a significant challenge in the global hunt for yield, but we still see a number of opportunities globally in the credit space to generate income.”

“A deterioration in the current account is likely to pose a further challenge, especially following the latest reports that China will ban imports on seven types of Australian commodities due to worsening bilateral relations.”

“Price-supportive fundamentals for iron ore and improving risk sentiment as the global economy recovers, will be positive for the pair going into 2021. We expect the AUD/USD pair to recover to 0.74 by the end of September next year amid broad-based USD weakness.”