Image © Adobe Images

GBP/AUD spot rate at time of publication: 1.7678Bank transfer rate (indicative guide): 1.7058-1.7182FX specialist providers (indicative guide): 1.7254-1.7553More information on FX specialist rates hereThe Australian Dollar is being topped to benefit from "bullish vibes from faster Asian recovery" in 2021 at Société Générale.

The France-based based lender and investment bank join peers in a consensus view that the global economy will stage a strong recovery in 2021, benefiting those financial assets that appreciate during times of improved investment sentiment.

The Australian Dollar has long enjoyed a positive correlation with investor sentiment, tending to rise when global stock markets and commodity prices are in the ascendency.

In particular, Australia's Asia-orientated skew should lead to outperformance in its currency.

"While the US and European economies are struggling with the second COVID wave and lockdowns, the situation in Asia-Pacific is completely different for most countries, all thanks to the superior containment of the virus," says Olivier Korber, an analyst at Société Générale.

The call comes as the Australian Dollar engages in a strong bout of appreciation against the Euro, U.S. Dollar and Pound Sterling.

The Pound-to-Australian Dollar exchange rate has been in retreat since October 22 when it was quoted at 1.85, it is now at 1.7698. The Euro-Australian Dollar exchange rate has fallen from 1.68 on October 20 to 1.6082 at the time of writing.

The Australian Dollar-U.S. Dollar exchange rate has meanwhile been trending higher since lows of 0.70 were printed on November 02, it is now at 0.7560.

Economists at Soc Gen say they expect the Australian economy to continue to expand in the coming quarters and regain its pre-crisis GDP level in the middle quarters of 2021.

This would be well ahead of the pace of most developed economies, which are expected to regain pre-covid crisis levels towards the end of 2021 and 2022.

Economic outperformance in a low-interest rate world is being tipped by foreign exchange analysts to be a key driver of currencies over coming months.

The expansion of the Chinese economy will likely propel the Aussie higher, with Soc Gen modelling showing a strong positive correlation between The Aussie Dollar and Chinese equities:

"The rebound in Chinese equities has strongly benefited the AUD," says Korber.

Further potential gains in the Aussie Dollar are expected to come courtesy of an improved relationship between the U.S. and China as years of trade tensions between the world's largest economies ease under the Biden administration.

"Global trade is now expected to see a V-shaped recovery, while the Biden administration should be more consensual with China. While the US’s hard-line stance won’t be abruptly reversed, the FX market is likely to welcome any softening, which will primarily benefit the AUD in G10 space," says Korber.

The Reserve Bank of Australia (RBA) is meanwhile not seen by Société Générale to be a substantial headwind.

While the RBA has introduced quantitative easing recently, it has done so with modest ambition.

"Amid faster Asian growth, anchoring local yields or even setting a negative cash rate is now unlikely to decisively depress the Australian dollar," says Korber.

{wbamp-hide start}