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Westpac update on the Australian dollar:
- The Aussie has looked more fragile in recent weeks … An extension to 0.7500 or below is plausible so long as the US dollar draws support from an economic rebound fuelled by a huge fiscal injection and rapid vaccine rollout.
- But our base case remains for the Aussie to trend higher, to 0.79 by end-Q2 and higher again in H2 21.
- Australia continues to run historically very large trade surpluses, with Q1 set to be the 8th consecutive quarter of current account surpluses.
- A$ should benefit from anticipation of a synchronised global recovery over 2021, especially in Asia.
- Australia’s coronavirus containment is allowing substantial freedom of economic activity though the RBA’s dovish stance should limit the upside on yields and thus on A$.
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