The Australian dollar is set to underperform on most crosses near-term given ongoing lockdowns. The AUD/GBP pair is risking a slide to low 0.52s but a revival is likely into the fourth quarter with help from dividend conversion, according to economists at Westpac.
Australia’s vaccination catch-up should also support the aussie some time in Q4
“Sterling remains an outperformer among G10 currencies this year. The aussie in contrast is second-weakest in the G10 this year, as Australia’s covid situation has swung from the benefits of low case numbers to the great stress of low vaccination as the delta variant surged globally.”
“The RBA’s cash rate guidance of no move 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 also finally start bearing economic fruit some time in Q4.”
“We look for some renewed pressure on AUD crosses near-term which could knock AUD/GBP to 0.5200/20, but for recovery through Q4.”