Recent AUD gains reflect the rebound in broad risk sentiment, strong exports, and a reopening boost. Market hawkishness has likely been helpful for the aussie but a dovish Reserve Bank of Australia (RBA) and the broader USD backdrop indicate that the AUD’s uptrend is likely to be unsustainable, in the view of economists at HSBC.

Unsustainable gains

“We expect the economic upswing in Australia in Q4 (following the Delta outbreak) to be more gradual than last year (following the initial COVID-19 shock).”

“In the next meeting on 2 November, we expect the RBA to remain dovish.”

“Much of the good may be priced in, limiting further AUD gains over the near-term. We believe the broader USD backdrop and the RBA’s continued dovishness mean that the AUD’s uptrend is likely to be unsustainable over the longer-term.”