Westpac's Australian Dollar Forecasts Show Strength Against Pound, Euro and U.S. Dollar

Image © Adobe Images

The Australian Dollar is predicted to strengthen against the Euro, Pound and U.S. Dollar over the next few months and through 2025, according to a major Australian lender.

Westpac has updated us with its latest monthly assessments and projections, and the expectation is for the Aussie currency to rise, driven in part by improving global sentiment and a stubborn Reserve Bank of Australia (RBA).

"We continue to expect that the RBA will be unmoved by the actions of its global peers. It is instead focused on the domestic inflation outlook and will not begin cutting the cash rate until it is convinced that inflation in on track to return sustainably to the 2–3% target range," says Luci Ellis, Chief Economist at Westpac Group.

She says the RBA has taken a more hawkish turn in recent months, characterising the level of domestic demand as strong and revising down its view of supply capacity.

"Although inflation is declining, it remains uncomfortably above target, so the RBA has all but ruled out rate cuts this year," says Ellis.

Westpac downgrades its growth projections for Australia, meaning that by end-2026 Australia will have seen five years of below-trend growth with GDP essentially flat in per capita terms.

"While not a recession, that is a longer period of stagnation than was seen during the early 1990s recession," says Ellis.

The U.S. Dollar is meanwhile expected to gently trend lower as global growth differentials with the U.S. narrow amidst a broader recovery.

The net result is a rise in AUD against the USD and other major currencies.

The Australian Dollar to Pound Sterling exchange rate is forecasted to reach 0.52 by the end of 2024, 0.52 by the end of the first quarter of 2025, 0.53 by mid-2025, 0.53 by the third quarter and 0.54 by the end of 2025

This gives a Pound to Australian Dollar exchange rate forecast profile of 1.92, 1.92, 1.89, 1.89 and 1.85 for the respective time points.

The Australian Dollar to Euro forecast profile is 0.61, 0.62, 0.63, 0.63 and 0.63. This gives a Euro to Aussie forecast of 1.64, 1.61, 1.59, 1.59 and 1.59.

The headline Australian to U.S. Dollar forecast profile is 0.68, 0.69, 0.70, 0.71 and 0.72.