Adam Boyton, Deutsche Banks’ Chief Economist said the nation’s surge in exports could drive a sharp narrowing in the current account deficit, which turn into the Australian Dollar’s advantage.
In a research that was published and was obtained by News Corp Australia, he said that Deutsch Bank expects that the current account deficit to have narrowed to 1.5 per cent of GDP in the last quarter of 2016, with a further improvement that would appear likely in in the first quarter of this year.
He also stated that “Instead of being driven by a weaker domestic economy lowering imports, the current narrowing in the current account deficit is being driven by a surge in exports,”
The Deutsche Bank expects the Australian exports as a composite share of GDP which is likely to have been around 21.2 percent in the fourth quarter of last year, and is expected to increase to about 22 percent in the first three months of this year.
“Instead of being driven by a weaker domestic economy lowering imports, the current narrowing in the current account deficit is being driven by a surge in exports” he stated.
Mr. Boyton also stated that the Surge in exports is “combined with the prevailing interest-rate differential suggests risk of further upside in the Australian dollar toward and indeed above 80 U.S. cents”
However, Mr. Boyton doubts the Australian dollar will get much more than the mid-80s against the U.S. dollar. The Australian dollar hasn’t reached the above 80 U.S. cents mark, never since May of 2015.