- AUD softer amidst broader USD comeback

- But is up 4% in 2020 against GBP and USD

- AUD-supportive factors still in place says UOB

- Update forecasts for AUD/USD and GBP/AUD

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GBP/AUD spot rate at time of publication: 1.8181Bank international transfer rates (indicative guide): 1.7553-1.7681FX specialist rates (indicative guide): 1.7754-1.8026Learn more about FX specialist rates hereThe Australian Dollar has risen 4% against the U.S. Dollar and British Pound in 2020, and further gains are possible according to a leading Asia-Pacific lender who have told clients they are upgrading their suite of forecasts for the currency.

"Both the EUR and AUD remain the key beneficiaries of the weaker US Dollar in the Developed Market space. We upgrade our positive EUR/USD and AUD/USD point forecasts further," says Heng Koon How, Head of Markets Strategy at UOB in Singapore.

The upgrade to UOB's forecasts comes at a time of outperformance by the Australian Dollar which has advanced against the majority of its G10 peers in 2020, driven by a sharp recovery in global stock markets and commodity prices following the coronavirus market meltdown of March.

The Australian Dollar's positive correlation with international stock markets, particularly U.S. stock markets, has meant the unrelenting rally in tech stocks has provided support, while China's recovery stimulus has driven up the price of Australia's leading exports, such as iron ore, coal and natural gas.

"The AUD/USD also recovered strongly from the 0.71 handle to the 0.74 handle over the past month on signs of further stabilisation and recovery in China’s economy," says How.

Above: AUD performance in 2020. If you would like to book today's exchange rate for use at some point in coming months, thereby protecting your budget, please learn more here.

A recovery by the U.S. Dollar, profit-taking on stocks and softer commodity prices have however this week blunted the Aussie Dollar's advances.

The Australian Dollar has this week fallen back from the 20-month high it reached against the U.S. Dollar on Monday, when AUD/USD reached 0.7413.

The Australian Dollar rose 0.80% against the Pound last week, but these advances appear to have since stalled and the Pound-to-Australian Dollar exchange rate looks set to retain a range north of 1.80 as has been the case since the final week of July.

However, UOB view that fundamental factors that have supported the Australian Dollar thus far in 2020 as remaining intact, which should drive further advances.

The Australian Dollar is often seen as a proxy for exposure to the Chinese economy, something confirmed by its tendency to track the Chinese Yuan (CNY). Therefore, UOB's expectations for CNY outperformance further underpins their expectations for AUD outperformance.

"As there was no change in our expectation of positive economic outlook for China as well as steady monetary policy from the PBoC, we believe that there is room for further CNY strength from here on," says How. "China’s latest macroeconomic indicators reinforce the expectation that the Chinese economy has stabilized and continues its gradual recovery."

"We raise our AUD/USD point forecasts further to 0.74 for 3Q20, 0.75 for 4Q20 and 0.76 for 1Q21 and 2Q21 (from 0.71 for 3Q20, 0.72 for 4Q20 and 0.73 for 1Q21 and 2Q21 previously)," says How.

UOB forecasts show they expect the GBP/USD to be at 1.32 in 3Q20 and 4Q20 and 1.30 in 1Q21 and 2Q21.

Using their GBP/USD and AUD/USD forecasts to establish a cross-rate forecast, this gives a GBP/AUD exchange rate of 1.78, 1.76 and 1.71.