AUD/USD to drop towards the 0.71 level by end-March – Westpac

AUD/USD fell below 0.7200 and seems to be having a tough time staging a convincing rebound. In the opinion of economists at Westpac, the pair is at risk of declining into the 0.7100 level by end-March.

The Aussie’s headwinds have strengthened early in 2022

“US inflation at 7% and unemployment below 4% have reinforced the Fed’s tightening bias, with a March rate hike almost fully priced. This should provide solid support for the US dollar, helping cap AUD/USD rallies into the 0.73 area.” 

“The 1 Feb RBA meeting is major event risk but Omicron has dampened Australia’s hoped-for summer economic revival, suggesting no hawkish turn.”

“The Aussie’s commodity price support is mostly still elevated, with large trade surpluses continuing. But China’s rate cut only adds to investor unease over its growth outlook.” 

“Risks to the 0.70 handle multi-week, end-March forecast 0.71.”