Australian Dollar: Coronavirus and China Developments Top Priority for Aussie

Coronavirus and China Developments Top Priority for Aussie

As a fresh week opens for the trading market, investors are keen to observe the topics which the Australian dollar will likely focus on in the week ahead. As the coronavirus is still dominating headlines, it will continue to be a focus for the Australian dollar as any spikes in fears surrounding the disease will see the risk-correlated currency drop. Furthermore, the Aussie will likely keep a close eye on the global risks as well as the Chinese sentiment. Which has seen the currency remain volatile over the past few weeks as the outlook is filled with uncertainties. Finally, AUD saw a decline after the RBA’s recent caution surrounding the currencies growth forecasts being cut in the short-term.

Coronavirus Still Very Much on the Australian Dollar’s Radar

The Wuhan coronavirus outbreak has been a topic which has taken the top spot of headlines for weeks. This has been justified as the number of individuals infected has skyrocketed with the death toll in double figures. The outbreak saw AUD drop as the risk-sensitive currency lost favour with investors as they fled to safe haven currencies like USD. After news broke last week of a potential treatment being discovered, AUD recovered many of its losses as investors risk-sentiment began to return. But Australia remains cautious as any spikes in infection would see the currency sharply decline. The rising death toll has kept AUD from rising substantially.

Chinese Sentiment Also a Key Factor for AUD Outlook

The performance of the Chinese economy is a main driver for AUD’s success. Being heavily linked with China in a trade sense, AUD depends on a positive Chinese economy for its own gain. Last week saw the Chinese economy lift slightly as it announced that it would soften tariffs on the US. The rise came from a market response to this action which hinted that the global trade tensions were lightening, which could give way for global trading growth without barriers such as tariffs in place. However, despite this lift to AUD, its gains were limited as its bullish run came to an end thanks to the rising death toll of the coronavirus paired with skittishness from the Reserve Bank of Australia.

RBA Cuts Growth Forecasts in the Short-Term, AUD Confidence Knocked

The RBA did little to help AUD’s case last week despite recently announcing to keep their interest rate steady at 0.75%. The RBA’s governor Philip Lowe cut Australian growth forecasts in the short-term after he admitted the central bank may have overestimated the figures considering the recent impact of both the coronavirus and before that the bushfires. As a result, AUD lost confidence in the markets.

AUD will be hoping for a positive start to the week today as it eyes up its RBA meeting minutes due on Tuesday, with its Westpac leading index out later that day. AUD will also see its employment data for January on Thursday. Investors will be hoping for an uptick in values.

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