📝 Lowering AUD Forecast to 0.65 By Year-End: Westpac

We have lowered our forecast for the AUD by year’s end from USD0.69 to USD0.65. We still expect the AUD to lift against the USD in 2023, with most of the recovery occurring in the second half of 2023 but have lowered our forecast for end 2023 for AUD from USD 0.75 to USD0.72.

Expect an AUD rebound in 2023 supported by 1)above consensus growth in China 2)policy to feed into risk on mood 3)Australia's strong commodity exports 4)potential narrowing of USD yield differential.

Risks to our forecast:

The global economic downturn that is expected for 2022H2 and 2023 is deeper and more sustained than we currently expect. Uncertainty about the depth and duration of the downturn will constrain any move to “risk on”.

Inflation proves to be much “stickier” than we currently expect, forcing central banks to “restart” their tightening policies, or, at best, delay rate cuts.

- Westpac