Westpac update on the Australian dollar:
- The Aussie has looked more fragile in recent weeks ... An extension to 0.7500 or below is plausible so long as the US dollar draws support from an economic rebound fuelled by a huge fiscal injection and rapid vaccine rollout.
- But our base case remains for the Aussie to trend higher, to 0.79 by end-Q2 and higher again in H2 21.
- Australia continues to run historically very large trade surpluses, with Q1 set to be the 8th consecutive quarter of current account surpluses.
- A$ should benefit from anticipation of a synchronised global recovery over 2021, especially in Asia.
- Australia's coronavirus containment is allowing substantial freedom of economic activity though the RBA's dovish stance should limit the upside on yields and thus on A$.
