Despite modest new 2021 lows, the Australian dollar has held above 0.7400, owing to rising stocks and solid commodities. According to Westpac, an insufficient vaccine supply puts the economy at risk of more lockdowns and a dovish Reserve Bank of Australia.
“Despite continuous Fed discussion of QE tapering, global risk appetite remains high, with US stocks lingering near record highs. Commodities are also a big help: Westpac’s AU export commodity price index (WCFIAECI on Bloomberg) is at an all-time high, up around 40% since last year “”March,” he says.
“Domestically, all eyes are on the COVID-19 outbreaks, which have put Sydney on lockdown for several weeks and now threaten VIC. The impact on Q3 GDP is mounting, while the belief is that once the outbreak is contained, activity would swiftly resume. The fact that unemployment fell to a 10-year low of 4.9 percent in June bolstered the case for resiliency “”Recent.”
“However, in contrast to the RBNZ or even the BoC, the RBA’s QE taper appears to be quite cautious, causing the A$ to underperform.”
“0.7400/25 could hold for a time, but a break to 0.7350 appears more plausible than a lengthy rally.”/n
