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Monthly wrap: AUD – Australian dollar bullishness fades as renewed lockdown hits

currency-newsMonthly wrap: AUD – Australian dollar bullishness fades as renewed lockdown hits
Key Takeaways:
  • Australia faces new lockdown: Australian dollar’s rally coming to an end
 
  • RBA maintains optimism despite Australia’s worsening coronavirus situation
 
  • AUD Monthly highs: £0.56, €0.62, $0.72, C$0.96, N$1.08
 
  • AUD Monthly lows: £0.54, €0.60, $0.69, C$0.94, N$1.05
 
Following months of strong performance from risk-on market sentiment and hopes for a rebound from the coronavirus pandemic, the past month was mixed for the Australian dollar.

Due to surging cases of Covid-19 in Australia’s State of Victoria, the region has been placed under fresh lockdown since early July.

Since then, the situation has yet to notably improve either. The state’s infection count hit record-highs in recent weeks, with 19 deaths reported last weekend.

Australia’s coronavirus situation, previously perceived as being one of the strongest among major economies, is now seeing a notable rise in ‘second wave’ fears.

This has weighed heavily on the Australian Dollar recently, causing the ‘Aussie’ to fall against major rivals like the pound and euro.

US-China trade tensions have been flaring once again, which are also weighing on the trade-correlated AUD.
Still, some optimism remains for the ‘Aussie’, with economic data continuing to show signs of recovery.

On top of this, the Reserve Bank of Australia’s (RBA) tone has remained generally optimistic. The bank has shown confidence in its current monetary policy and continues to refute the possibility of negative interest rates.

The bank has also surprised markets by not expressing much concern over the recent strength of the Australian dollar.

With the Australian dollar’s appeal seeming to fade as Australia’s coronavirus concerns worsen, AUD’s biggest rallies may be behind it.

If Australia struggles to put a cap on its ‘second wave’ of coronavirus infections, there are concerns the nation could still be experiencing lockdowns during the holiday season.

Australian coronavirus jitters could be softened however, if Australian economic data continue to impress investors.

Australia’s July job market report, due later this week, will provide an insight into the employment market and state of Australia’s economy.

Then, aside from August PMIs due next week, Australia’s economic calendar will be relatively quiet for the remainder of the month.

This will leave Australian dollar investors awaiting domestic and global coronavirus developments and shifts in global risk-sentiment.

If there are any surprises in Australia’s outlook in the coming weeks, markets will even more eagerly await September’s Reserve Bank of Australia (RBA) decision.
 
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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