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Reserve Bank of Australia’s somewhat surprising expansion of funding facility and a firmer USD tone point to consolidation near-term as the aussie rejected 0.74 for now, economists at Westpac apprise.

Key quotes

“A firmer tone to USD has been the main driver, with the aussie continuing to enjoy background support from global risk appetite and commodity prices, most obviously spot iron ore at $128/tonne.” 

“Q2 GDP slumped as expected but households appear ready to spend once restrictions loosen. The RBA meeting leant dovish, expanding the term funding facility and considering ‘further monetary measures.’ There was little reaction on the day and spec positioning is only modestly long, but AUD may be due for underperformance on some crosses.” 

“We opt for neutral on the week with DXY consolidating after its sharp decline, aided by ECB unease over euro strength. AUD/USD may well not retest 0.7400 in coming days but should find support around 0.7250.”

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