The Aussie dollar has recovered sharply from its March low of 2.0780 (interbank market) against the pound as measures put in place by nations and their central banks provide investors with some comfort. The Aussie dollar has been lifted by the globalised effort to counter the worst of the coronavirus pandemic crisis. The Aussie was also boosted by its own central bank’s decision to not slash interest rates to a new historic low. Instead the Reserve bank of Australia maintained interest rates at 0.25%. Also, commodity prices have received more support, and with Australia being a major raw material exporter, that too has helped the currency. Lastly, whilst there is some scepticism over China’s latest economic data, which showed a better performance than consensus, this too has aided the Aussie dollar.
However, all is not rosy for the Australian economy as S&P Global Agency has placed Australia’s valued triple A credit rating on watch. While this is clearly negative, many other nations have become familiar with downgrades as their national debts blow up in the wake of the coronavirus pandemic.
The coronavirus is still firmly in the driving seat of global markets as global cases swell to more than 1.6 million and the death toll approaches 100,000. Businesses remain closed and the global economy faces a certain recession, not a good sign for the antipodean currency that relies on global growth and a low risk outlook.
This coming week will bring a series of economic data including consumer and business confidence, but the main focus will be on Thursday’s employment data, which has a history of being strong even when others are not. The current unemployment level is 5.2 per cent but this is expected to rise sharply, however the government has recently confirmed it will subsidise the salaries of 6 million citizens for 6 months, which will lessen the damage. In addition, investors will assess the latest Financial Stability Review, which some suspect may be over positive on the condition of Australian finances.
In summary, the Australian dollar has made impressive gains but will have a difficult week ahead in which we could see some losses. For more information about these factors and how they could impact your AUD exchange, get in touch using the form below.