- AUD forecast to outperform in 2021

- Commodity rally to aid CAD and AUD

- But GBP/AUD can edge higher

Image: © Pound Sterling Live. Background image of Goldman Sachs stall on the floor of the New York Stock Exchange. REUTERS/Brendan McDermid/File Photo

GBP/AUD spot rate at time of writing: 1.8168Bank transfer rate (indicative guide): 1.7532-1.7659FX specialist providers (indicative guide): 1.7744-1.8000More information on FX specialist rates hereThe boost to global economic growth in 2021 should benefit the Australian Dollar say analysts at investment bank Goldman Sachs, who have told clients buying the currency forms one of their top trades for the year ahead.

In a forecast note detailing their currency views for 2021, Goldman Sachs strategists say they prefer expressing a pro-growth view via buying the Canadian and Australian Dollars, "these currencies should see positive returns over the next 12 months as the global economy reopens and central banks across the globe maintain accommodative policy," says Zach Pandl, an economist with Goldman Sachs.

The reopening of the global economy following the coronacrisis of 2020 should meanwhile disadvantage the U.S. Dollar according to analysts, who say the U.S. economy's period of outperformance will diminish as the rest of the world plays catch up.

Furthermore, the Dollar's 'safe haven' status - which served it particularly well in early 2020 when the covid crisis first mounted - will be of less use in the 'risk on' environment of the coming year.

"Commonwealth currencies (AUD, NZD, CAD) and European satellites (NOK, SEK) tend to perform well when the global growth outlook improves due to their relatively high exposures to global trade," says Pandl.

Expectations for a boost to global economic growth in 2021 have been aided in November by news that three different covid-19 vaccine candidates have proven their efficacy in preventing the transmission of covid-19 in phase three trials.

"The global economy is at the cusp of entering the “sweet spot” of a cycle where growth prospects are more favourable and inflation remains subdued. Importantly, we doubt the positive economic implications of a coronavirus vaccine will lead policymakers in advanced economies to prematurely withdrawal policy support or avoid cranking‑up stimulus. Commodity sensitive currencies are poised to benefit in this environment," says Elias Haddad, Senior Foreign Exchange Strategist at Commonwealth Bank of Australia.

The rollout of the first vaccines could start in some countries by as early as December, with the U.S., UK and Germany indicating they have programmes in place.

However, both Canada and Australia are believed by Goldman Sachs to have economies that are in stronger shape than many of their peers, owing to their response to the pandemic. This should allow an outperformance advantage in 2021 that could benefit their currencies.

"Both Canada and Australia are handling COVID fairly well and their central banks should be done cutting rates," says Pandl.

Analysts at Goldman Sachs are forecasting global commodity prices to rally as the global economy grows over coming months, a trend that will likely benefit 'commodity currencies' such as the Canadian and Australian Dollars.

"The Australian Dollar and the Canadian Dollar should see the best returns in a commodity price rally," says Pandl.

In fact, a new 'bull cycle' for the commodities sector is being predicted: "Our outlook should be particularly supportive of the commodity complex on boosts to demand and structural underinvestment (especially in non-energy commodity producing sectors), paving the way for a new bull cycle to emerge in 2021."

The investment bank expects both oil and copper to perform particularly well in the near-term, which should, respectively, benefit the Canadian and Australian Dollars the most in G10.

Putting their view into action, Goldman Sachs are, "going long a basket of these two currencies is one of our top trades going into 2021," says Pandl.

The Australian Dollar-to-U.S. Dollar exchange rate is forecast at 0.75 on a six-month horizon and 0.77 on a 12-month horizon. Spot is currently at 0.7327.

Using Goldman Sachs' GBP/USD forecast for these timeframes we can ascertain the forecast targets for the Pound-to-Australian Dollar exchange rate.

A GBP/USD forecast of 1.38 in six months gives a GBP/AUD cross of 1.84 in six months, while a GBP/USD forecast at 1.44 in 12 months gives a GBP/AUD cross of 1.87.

The spot GBP/AUD rate at the time of writing is 1.8216.

{wbamp-hide start}