Pound Forecast to Break 2.10 Against Australian Dollar in 2015

St George Bank AUD Forecasts for 2015 have been released and a softer Aus dollar exchange rate complex is predicted.

A strengthening US dollar and British pound will combine with static Reserve Bank of Australia (RBA) policy in 2015 to keep the Australian currency under pressure over the course of the next 12 months.

According to the latest Australian Dollar Outlook release from St. George Bank the currency could fall into the mid 0.70’s against its US counterpart.

For reference, heading into the holiday period we see the following currency rates on offer:

The Australian dollar to US dollar exchange rate (AUD/USD) is at 0.8143 while the British pound to Australian dollar (GBP/AUD) is at 1.9197.

The euro to Australian dollar (EUR/AUD) is meanwhile quoted at 1.5607.

Forecasting a Softer Australian Dollar Profile in 2015

What are they basic fundamental drivers of a weaker Australia dollar and a stronger pound sterling and US dollar?

Besa Deda, Chief Economist at St. George tells us:

  • We now expect the Reserve Bank to leave rates on hold next year.
  • The record low cash rate is having a positive impact on economic activity, however, the pace of growth remains below trend. It now seems unlikely that growth will gather sufficient pace during 2015 to warrant lifting the cash rate.
  • The risk of a cut in the cash rate has also increased.
  • We continue to expect the US Federal Reserve to start raising rates next year, most likely in June but a rate hike sooner cannot be ruled out.
  • Therefore, Australian-US interest-rate spreads should narrow further and pressure the AUD/USD exchange rate lower.
  • The Australian dollar has also broken under key technical levels (US $0.8540 in late November) and commodity prices have declined further, especially those of the bulk commodities, hurting the local currency.

Deda also cautions that the AUD also acts as proxy to the Chinese economy and recent Chinese economic data has been patchy. China’s central bank recently cut the lending rate to help revive the economy but more stimulus might still be needed.

AUD Forecasts Lowered

The Australian to US dollar exchange rate (AUD/USD) is now predicted to finish 2015 at US$0.7500  rather than US$ 0.8200.

Turning the equation around this is a US to Aus dollar (USD/AUD) rate of 1.3333.

The Australian to pound sterling exchange rate (AUD/GBP) is now expected to be at 0.4690 at the end of 2015.

This is a pound to Aus dollar (GBP/AUD) rate at 2.1321.

Below is the full table: