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Economists at Credit Suisse highlight the disappointing pace of Australia’s COVID-19 vaccine rollout as reinforcing the potential AUD-downside risks within the medium-term 0.7415-0.7800 range.

Lockdowns are currently more of a risk than an immediate driver  

“COVID-19 cases in Australia remain controlled, and markets remain relatively constructive on Australia’s growth outlook. The April IMF report upgraded Australian growth expectations to 4.5% in 2021, a full percentage point above their Jan estimate.”

“For now, we think that vaccine delays are more likely to cap AUD upside rather than trigger an AUD downtrend. Given the government’s sensitivity to COVID-19 spikes, however, we think the balance of risks could deteriorate quickly if infection numbers were to rise.”  

“The currently stable status quo keeps us thinking that targeting a range of between 0.7415 and 0.7800 in AUD7USD is appropriate. Lingering faith in the reflation trade leaves us still expecting AUD outperformance against the funding currencies.”