- AUD on the Rise as Coronavirus Threat Looks to Lighten
- AUD Gains Could Continue Bullish Pattern on China Trade Developments
- Coronavirus Will Remain the Focus for AUD Outlook but Aussie Data Also Looms
The coronavirus remains the key factor to the Australian dollar’s success in the weeks to come. After several weeks at the bottom of the trading pile due to the outbreak of the coronavirus, the Australian dollar appears to be benefitting from an increased market risk sentiment. The lift in the market’s mood is due to the reduced fear of the virus after Chinese researchers claim to have found an effective treatment for patients with the virus. This has sparked newfound optimism that a vaccine could potentially be engineered in the coming weeks. As a result of this, the Australian dollar has risen after weeks of lulls spurred on by risk-off market sentiments.
Following the coronavirus outbreak several weeks ago, the Australian dollar has seen a significant drop in its support. This decline in support came after the market exhibited a risk-off mood regarding the virus and the impact it could have on the Chinese economy following the outbreak in Wuhan. Risk-sensitive currencies like the Australian dollar have suffered as a result of the fear that the virus could impact the demand of commodities like oil. However, news has surfaced with a breakthrough in the treatment of the virus as Chinese researchers reported they have found a drug which is effective in treating the virus. This lifted optimism surrounding the control of the virus and saw AUD rise yesterday. It earned its spot amongst the best performers yesterday in a surprise reversal of last week’s plummet.
AUD investors will also keep an eye on the developments in China concerning Chinese trade. The coronavirus has dampened spirits over the past couple of weeks, particularly in China where the outbreak originated. But with the increased optimism that a treatment could be formulated, the market has found support through wishful thinking. The reports of a treatment being found boosted AUD further as the Chinese trade news helped to keep the markets optimistic.
The Australian dollar has managed to hold onto most of this week’s impressive gains, but is still at risk of any developments in the coronavirus outbreak. Should the Chinese economy take any further hits at the hands of the coronavirus spread, AUD will likely tumble with it. As well as this, Australia will face its business and consumer confidence results next week which will give investors a better idea over the direction of the Aussie economy. Any impressive results could help bolster AUD further.
News from the early hours this morning saw the RBA Monetary Policy Statement released by the Reserve bank of Australia, which reviews economic and financial conditions, determines the appropriate stance of monetary policy and assesses the risks to its long-run goals of price stability and sustainable economic growth. The statement acknowledged a GDP forecast revision from 2.5% to 2% and mentioned the significant near-term risks to China from the coronavirus. However, it appears the RBA look to remain accommodative in regards to its monetary policy for some time. The RBA noted that unemployment would have to be moving “materially higher” to warrant another cut in cash rates, so for now the rates look secure. Furthermore, yesterday evening saw RBA governor Philip Lowe give a speech in which his stance remained cautiously optimistic for AUD’s outlook, which offered peace to AUD investors.
If you’re considering buying or selling Australian dollars and would like to compare rates or know more about the factors that could impact your exchange rate, feel free to contact me directly, I look forward to hearing from you.