Westpac Flag Risk Of Fresh YtD Lows, But See Recovery

Westpac note that "the Aussie has lost more than 4% against a resurgent U.S. dollar since the June FOMC meeting, underperforming most of the G10. The RBA's heavily caveated tightening announcement in July left the Aussie yield outlook unattractive as the U.S. economy validated the Fed's hawkish shift, the RBNZ announced a sudden end to QE and the Bank of Canada continued tapering. Australia's Covid lockdowns are depressing Q3 GDP estimates and with low vaccination coverage, renewed outbreaks will threaten the economy for some time. Near term risks are for fresh 2021 lows in the $0.72-0.73 region. But we see AUSD/USD recovering to $0.75 by end-Sep, backed by a domestic economy that recovered pandemic job losses well ahead of other countries and a historically strong external position: 41 consecutive monthly trade surpluses and a record 8 consecutive quarters of current account surpluses."