Westpac thinks the AUD/USD is likely to trend higher in coming months

According to Sean Callow, a strategist at Westpac in Sydney:

  • The failure of U.S. yields to rise in response to decent economic data does raise more serious questions about whether the U.S. dollar is primed for a sustained rally
  • Particularly against high-yielding currencies such as the Aussie
  • Treasury yields showed limited reaction to this month to strong U.S. economic data, including better-than-expected retail sales
  • Over the next few months the Aussie will trend higher against the U.S. dollar

Westpac forecasts the AUD/USD to 88 cents next month, then to 90 cents in June 2015 & 92 at the end of 2015

More from Westpac:

  • Price of steel reinforcing bars, used in construction, has risen 3.5 percent since September 26
  • Forecast that spot iron ore prices are set to recover to $100 per ton in the first quarter of 2015, from $80/ at the end of 2014

And again from Callow:

  • The RBA is likely to continue to see an overvalued Australian dollar is a constraint on Australian growth”
  • To the extent that commodity prices rise, as we expect, the currency’s fair value will also rise, so over-valuation will not necessarily grow