Rallying commodity prices underpin the AUD


Market Update: 6 January 2021

  • COVID is once again resurgent with many western economies going back into Lockdown. While we ultimately expect the various vaccines to curtail the virus, the immediate prospects look grim and could certainly contribute to market volatility in Q1
  • In the immediate term, COVID concerns could well spike risk aversion and a potential pull back in AUD/USD towards 0.74/0.75. However, longer term we continue to favour a sustained depreciation of the Greenback in 2021, and 0.8000 could well be achieved by April. 
  • Given the nature of fiscal and monetary stimulus post COVID, hard asset prices and commodity prices are expected to continue their rally in 2021 which will also provide support to the AUD more broadly, despite its lack of a yield advantage. 
Sources: Bloomberg

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