Westpac: AUD/CAD: Covid Contrast Returns

Westpac note that "AUD/CAD in February reached highs since March 2018. Indeed for 4 consecutive days in late February, AUD/CAD printed highs within 10 pips of CAD1.0000. The subsequent reversal extended as far as a test of CAD0.9500 on 1 April. This seems excessive, with the recent bounce in line with our baseline for the pair to trend back towards CAD0.99-1.00 multi-week/month. Admittedly, CAD has enjoyed some clear positives in recent weeks. Even after a pullback in late March, Canada's benchmark oil price, Western Select, is still up 50% since early January, whereas Australia's key iron ore price has been broadly range-bound this year, albeit at very high levels. The Bank of Canada's tone has also helped CAD lately, notably the 23 March announcement that it would end the QE programs in which it bought commercial paper, provincial bonds and corporate bonds. This is in contrast with the RBA which renewed its QE program well ahead of its expiration and kept the narrative on healing the job market. However, Australia's benign Covid situation allows for sharp reacceleration, while Ontario last week returned to a 4 week lockdown. Canada's daily new covid count is at record levels above 8000, while Australia has had just 1 local transmission in the past 10 days."