Updated in July 2018
At the half way point of 2018, the Australian Dollar has fallen further and faster than most economists thought at the start of the year.
Forecasts for the Australian Dollar vary from bank to bank and from month to month. This article looks at the different outlooks and is updated regularly.
Bank Forecasts for the Australian Dollar in 2018
Volatility rocked currency markets in 2016, but stabilised in 2017 and ended the year even stronger than the "Big 4" banks anticipated.
As the dollar dropped in the first months of 2018, all the banks lowered their AUD forecasts to reflect their change in expectations.
Currently the AUD is around 74 cents.
ANZ made slight adjustments lower to its AUD forecast recently and remains negative on the AUD. With the AUD/USD slightly lower than initial expectations, the bank moved its year-end forecast to 72 cents, from 74 cents previously.
National Australia Bank lowered its near-term Australian dollar forecast recently to reflect a weaker AUD. However, the bank still expects the AUD to end the year at 75 cents, which is on par with CBA.
Calculate the Cheapest Way to Transfer Money Overseas
How Low Will the Australian Dollar Go?
The banks appear divided on how much lower the AUD will be by the end of the year. With the current AUD/USD exchange rate trading just slightly below CBA's, ANZ's and NAB's expectations, will the ‘Big 4' banks hold on to their current forecasts? Potentially.
Let's examine the 3 most likely reasons the Aussie will move lower than current forecasts:
- The US economy picks up, US political risks ease, and their central bank increases interest rates, supporting the USD
- The Australian economy falters and inflation only slowly and gradually picks up, decreasing the risk of interest rate hikes from the RBA
- China’s economic growth slows more than expected, lowering demand for our commodities (and our Aussie dollar)
AUD Crosses Bank Forecasts
AUD EUR forecast for 2018
The AUD EUR peaked in early June around 65 cents, but has since fallen again. Recent declines were more than the major banks were originally expecting. It is currently around 63 cents.
ANZ has the AUD EUR rate declining to 0.55 by the end of 2018, the lowest out of the four banks. In contrast, CBA is the most optimistic and expects the AUD EUR rate to remain above 0.65 cents by the end of Q4 2018. NAB backtracked and raised its AUD EUR forecasts up to 64 cents (or 0.6400). Similarly, Westpac recently upgraded their expectations for the AUD EUR to go up to 64 cents.
AUD GBP forecast for 2018
Ongoing political uncertainties around Brexit and an economic slowdown for much of 2017 has made the GBP the most undervalued major exchange rate against the USD. This uncertainty is a key reason why major banks lack conviction and have a flat profile for the AUD GBP in 2018.
NAB has raised its AUD GBP to fall to 54 cents by year-end. Meanwhile, CBA has thinks the AUD GBP rate will track slightly higher to 0.5845 by December 2018.
AUD NZD forecast for 2018
All the major banks we looked at expect the AUD/NZD exchange rate to reverse recent declines near-term. The reason(s)? A recovery in key Australian commodity prices combined with a drop in key New Zealand commodity prices.
By the end of the year, ANZ and NAB expect the AUD/NZD exchange rate to fall to 1.07. CBA is predicting a rise to 1.1067. Westpac also upgraded recently to 1.10. Commonly, the outlook is said to be dependent on movements in the US dollar and economic strength in Australia and New Zealand.
General advice: The information on this site is of a general nature only. It does not take your specific needs or circumstances into consideration. You should look at your own personal situation and requirements before making any financial decisions.