AUD/USD to advance nicely towards 0.75 by end-2022 – ANZ

After another turbulent year for currencies, the 2022 outlook for the aussie looks a little mixed. After a balancing act, economists at ANZ Bank expect the AUD/USD pair to trade at 0.75 by year-end.

Cyclical positioning should continue to limit AUD downside 

“We expect the economy to have a better year as high vaccination rates and eased mobility restrictions set the stage for a sustained rebound in activity.” 

“For one, we feel Australia is likely to lag the global inflation cycle thanks to less intense supply side friction and lower wage pressure through the first half of next year. The second reason is that the rollover of fixed rate mortgages will lift borrowing costs in isolation of any change to the official cash rate. These factors are likely to keep the Reserve Bank of Australia (RBA) at the back of the pack when it comes to policy normalisation.”

“The global economy will have more momentum – and more inflation – at the start of this tightening cycle than in any other cycle of the past four decades. This should keep cyclical asset allocations above average, and that should support assets like the AUD that are leveraged to the global cycle.”

“With the risk of central bank tightening netted off against above-trend growth, the outlook for the AUD looks broadly balanced. We have retained our AUD/USD year-end forecast of 0.75.”