Westpac: AUD Outlook Vs GBP - Vaccination Rates Vs Commodity Prices?

Westpac note that "sterling has had a good year so far, though its outperformance in the G10 was very much in Q1 (#2) rather than Q2 (#8). Driving gains early in the year was the UK's rapid vaccine rollout which has allowed for a loosening of activity restrictions as Covid cases and deaths fell steeply. In contrast, the EU's halting vaccination program damaged the Eurozone economy and helped drive steep gains in GBP versus EUR. This UK vaccine outperformance is arguably largely priced by now and the May BoE meeting left the pound a little softer. While the Bank raised growth forecasts, Governor Bailey hosed down QE taper talk by pointing out that the total asset program was unchanged at GBP895bn. Our baseline view is for AUD to find support on dips en route to AUD/GBP 0.56 or GBP/AUD 1.78-1.79 end-June and 0.57 or 1.75 end-September. We continue to see scope for the Aussie to trend higher on most crosses, as Australia's export basket will find substantial support from a synchronised global rebound in H2 2021. The Aussie should also outperform the pound if global risk appetite improves in coming months, which seems likely given central bank policy settings. However, near term the Aussie could print fresh lows/sterling highs since November 2020, given Australia's high profile tensions with China and the flare-up of Covid-19 cases in other key Asian trading partners which are prompting new activity restrictions and popping planned travel bubbles, in contrast to Europe's increasingly promising summer travel season."