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It is hard to make the case for a sustained global recovery against that global Covid-19 trend and therein lies the Aussie’s Achilles heel, according to economists at Westpac Institutional Bank.

Key quotes

“We suspect COVID-19 outperformers like Australia will need to demonstrate sustained growth recovery and outperformance over several quarters. That would mean traditional drivers of currencies such as interest rate and growth differentials won’t weigh on the US dollar and help the Aussie until late 2020, at the earliest. Time will tell.”

“Ongoing pressure on households and corporates to repair balance sheets, not to mention likely high structural unemployment as some industries are very slow to recover such as tourism, will likely thwart any meaningful global activity reboot. The next few months will surely see a continuing run of brutal global activity data.”

“Our end-June forecast is 0.62. Confirmation of a huge drop in employment on 14 May could be one catalyst for renewed A$ decline.”