An updated Australian dollar outlook via Westpac (in brief):

  • The northern summer's risk rally and USD rout extended to AUD/USD
  • Upbeat equities and commodity price gains including iron ore, copper and gold reinforced the positive A$ mood.
  • Positioning was therefore likely vulnerable to a reversal from any number of catalysts in a world still struggling with Covid-19. The RBA's more dovish tone adds weight to the A$, with Westpac now calling for a cash rate cut to 0.1% in Oct. But the RBA is still not attracted to negative rates and Australia's historically large trade surpluses provide some insulation.
  • Our base case of a weaker USD over Q4 argues for AUD/USD to resume its up-trend multi-week/month. While a correction to 0.68-0.69 near term seems plausible, we retain our 0.75 year-end target.

Westpac amended their forecast for the next RBA rate cut earlier this week:

(In that post there is a link to NBA calling for a cut also, NAB saying October or November).