AUD/USD to settle above the 0.74 handle – Westpac

AUD/USD is posting a solid gain including three-week highs just short of 0.7400. Dividend conversion should see the aussie trade with the 0.74 handle. But Australia’s economy may keep contracting into Q4 with relief from covid restrictions still distant, economists at Westpac report.

Australian economic growth held up in Q2 ahead of lockdown-driven fall in Q3

“The soft USD tone following Jackson Hole was a key driver, though it is doubtful that there is much more fuel from this source unless US Aug NFP is a big disappointment.”

On the domestic front, data tended to the solid side with a record trade surplus in July and an upside surprise on Q2 GDP that at least left the economy in a decent position before what will be one of the largest declines on record in Q3.”

“The RBA Board will ponder a notable deterioration in the economy vs a month ago, with VIC’s lockdown 4 weeks and counting as ‘covid zero’ slips away. Should the RBA pause its planned QE taper, it is doubtful AUD would suffer much damage. Mining dividend conversion is likely already lending support.”

“Near-term risks to the low 0.74s but as the Sep FOMC draws near, AUD/USD could well be back near 0.72.”