AUD/USD to challenge 0.73 amid risks of a slow vaccine rollout – Westpac

The Reserve Bank of Australia (RBA) may be talking about a quick rebound in Australia’s economy just as soon as coronavirus is contained but the aussie seems to have been punished for Australia’s slow vaccination rollout, a situation that will not improve quickly, according to economists at Westpac.

Australia’s trade surpluses keep piling up

“Australia’s run of trade surpluses is now 42 months, with June a record high. We must note that border closures continue to cripple tourism and education exports, so the reliance on resources is extremely high. This should become more potent for A$ in late August and September as mining company dividend conversion comes into closer focus. Before then, however, it is hard to be enthusiastic about A$.” 

“The RBA surprisingly maintained its plan to reduce QE next month. Given the sharp downgrade to Q3 GDP estimates, we don’t share the upbeat expectation of the economy rebounding quickly.” 

“A$ has been punished for Australia’s sluggish vaccine rollout. There is more economic damage ahead, with Sydney payrolls already -5% in just 2 weeks and VIC today returning to lockdown for the 6th time.”

“The 0.73 handle remains very sticky but a test of 0.7300 seems on the cards.”