The pound traded with modest gains on Tuesday, following the publication of the UK’s latest employment figures.
The Australian dollar suffered after the RBA Governor Dr Philip Lowe commented that Australia’s economy is continuing to reel from the coronavirus pandemic.
Mr Lowe said: ‘The global economy has experienced a severe downturn as countries seek to contain the coronavirus. Many people have lost their jobs and there has been a sharp rise in unemployment. Leading indicators have generally picked up recently, suggesting the worst of the global economic contraction has now passed.’
As a result, ‘Aussie’ investors are becoming increasingly concerned that Australia’s economy could take longer than previously expected to recover.
This comes after a generally positive week for the Australian dollar last week. Positive PMI figures from China and a risk-on mood caused by US jobs data and a possible coronavirus vaccine supported the ‘Aussie’.
However, Australian dollar gains were capped after Prime Minister Scott Morrison stoked tensions with China over his offer to help Hong Kong citizens.
With China being Australia’s largest trading partner, any further trade tensions between the world’s two largest economies would drag down the risk-averse ‘Aussie’.
Looking ahead, AUD investors will be paying close attention to Australia’s home loans data for May this week.
If Thursday’s home loans data shows any signs of improvement, then we could see the ‘Aussie’ rise.
Meanwhile, any signs of a successful coronavirus vaccine trial could buoy the Australian dollar, as this would provide further optimism for the global economy’s recovery.
However, after reports of Melbourne re-entering lockdown for six-weeks, we could see the Australian dollar struggle throughout the week as the nation’s economic recovery remains uncertain.
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)