The Aussie dollar is likely to come under increased selling pressure as coronavirus spreads and investors tread cautiously around risk currencies. The pound gained another 1.2% against the Aussie dollar last week and at one point, touched 2.0567 before ending the week at 2.0465 (interbank trading levels). Sterling has now gained more than 4.5% in the past month and gains could be extended in the coming weeks.
With more than 1.2 million confirmed cases globally and approximately 65,000 deaths worldwide, coronavirus is continuing to rip through the heart of the global economy. Australia’s largest trade partner China is apparently recovering and trying to return to normal although many have questions over the true extent of the damage in China. US intelligence services stated that China’s death rate is much higher than the 3,000 reported although the true extent of the number infected and death toll will never be known. Furthermore, there are suspicions that recent economic data released from China has been massaged. Both manufacturing and services sectors Purchasing Managers Indexes (PMI) had surprise readings above market expectations, which if true, would be encouraging for the Australian economy that heavily depends upon the export of commodities to China.
The Reserve Bank of Australia meet this week, although having already slashed interest rates to 0.25%, and launched an unprecedented amount of quantitative easing, Governor Phillip Lowe and his members may pause but with events changing swiftly, anything could happen.
5,500 confirmed Cases in Australia
Australia now has more than 5,500 confirmed cases of coronavirus and that number is expected to shoot up despite the country being on lockdown. The Australian government has followed the path of many other countries and told their citizens to remain at home. Only those that are deemed essential and key workers continue to travel.
It seems all but certain that coronavirus cases will continue to rise at an alarming rate in the short term, decimating national economies and taking huge human casualties. Some are already forecasting national economies to crash by 10 per cent but others go even further, predicting a crash of 20 per cent. At this stage, no one really knows what the true extent of the damage will be but the worse it gets, the more difficult it’ll be for the Aussie dollar to maintain current trading levels.
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