National Australia Bank (NAB) has revised its year-end forecast for the Australian dollar against the US dollar (AUD/USD) higher, now projecting the pair to reach 0.70 by the end of 2025. This marks an upgrade from NAB’s previous forecast of 0.67, reflecting the bank’s expectation of a prolonged period of US dollar weakness and shifting global financial dynamics.
Currently, the AUD/USD is trading around 0.6450, having pulled back from a five-month high of 0.6493. The recent retreat comes as the US dollar finds support ahead of the Federal Reserve’s upcoming policy decision, but NAB’s outlook remains bullish for the Australian currency over the longer term.
NAB’s revised forecast is underpinned by several key factors:
- Prolonged USD Bear Market: NAB expects the US dollar to remain under pressure, driven by changing interest rate differentials and a broader global shift away from USD dominance.
- RBA Policy Easing: The Reserve Bank of Australia is anticipated to cut rates by 50 basis points in May, but NAB sees RBA policy as less influential on the AUD/USD trajectory than broader US dollar trends.
- Global Growth and Risk Sentiment: While global growth concerns persist, NAB believes that the negative impact on the AUD is outweighed by the structural forces weakening the US dollar. The bank notes that commodity price softness and emerging market risk remain headwinds, but these are not enough to offset the expected USD decline.
- Technical and Macro Factors: NAB identifies 0.64 as a key resistance level for the pair in the near term, but expects this to be broken before year-end as the USD downturn continues.
Looking ahead, NAB forecasts the AUD/USD to remain around 0.65 through mid-year, gradually rising toward 0.67 by December, with the potential to reach 0.70 by year-end if current trends persist. The bank also suggests that, should the US dollar’s decline accelerate, the AUD/USD could climb as high as 0.75 in 2026.
This upward revision comes amid a backdrop of improving domestic sentiment in Australia, following Prime Minister Anthony Albanese’s re-election and renewed government focus on cost-of-living relief, tax cuts, and healthcare.
However, NAB cautions that ongoing global growth downgrades or setbacks in US trade negotiations could challenge the bullish outlook for the Australian dollar.
In summary, NAB’s new year-end target for AUD/USD at 0.70 signals growing confidence in the Australian dollar’s resilience and the likelihood of a sustained US dollar bear market through 2025.