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  • Writer's pictureCrest Economics

Exchange Rate Predictions- June 2020

Westpac has lifted its AUD forecasts to USD0.72 by the end of 2020 and USD0.76 by the end of 2021. This is on the back of a recent rise over the past month from USD0.65 to USD0.685. This has been generated by a strong performance in the iron ore price which has risen nearly 25% from its lowest point in the pandemic. That increase was in turn brought about by supply disruptions from Brazil due to the pandemic and a rise in demand for steel in China as industrial production and construction resumes.

Westpac now predicts those positive influences on the iron ore price are likely to remain for the foreseeable future. Brazil's struggles with coronavirus suggests it isn't going to overcome its supply issues any time soon. China's determination to make up for the "lost" first quarter over the course of 2020 means that demand for iron ore looks unlikely to dissipate.

Finally, Westpac projects that another factor boosting the dollar - our strong coronavirus response - will continue to boost consumer confidence. On May 13 the Westpac MI Consumer Sentiment Index surged by 16.4%. That has been followed by a 6.4% lift in June effectively restoring the Index to only 2% below the average level in the six months of September – February which preceded the record 20% collapse in March and April.

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