/GBP: Westpac: Aussie Relies On Vaccination Catch-Up

Westpac note that "GBP remains an outperformer among G10 currencies this year. Driving gains has been the UK's rapid vaccine rollout which has allowed for a loosening of activity restrictions as COVID cases and deaths fell steeply. Sentiment may be dampened somewhat as summer ends, pushing cases higher."

• "There will also be some caution over the UK labour market as the government's wage support expires end-September. The Bank of England cited spare capacity in the economy in August as it held its key rate at 0.1% and reiterated its bond purchase total of GBP895bn."
• "The Aussie in contrast is equal-weakest in the G10 this year, as Australia's COVID situation has swung from the benefits of low case numbers to the stress of low vaccination as the delta variant surged globally."
• "The RBA's cash rate guidance of no move from 0.1% until at least 2024 is more dovish than the BoE's, supporting the pound. Near term the Aussie will also find little support from domestic conditions as lockdowns stretch on. But late Q3 and early Q4, conversion of huge mining company dividends should help A$ crosses recover."
• "Australia's vaccination catch-up should finally start bearing economic fruit some time in Q4. As we saw with the pound when UK vaccinations accelerated in early 2021, the market narrative can change quickly. We see near term risks of a test of AUD/GBP GBP0.5200/20 or GBP/AUD AUD1.9200/30 but then a reversal to GBP0.5375/0.5400 or GBP/AUD AUD1.8520/1.8600 during Q4."