The pound trended broadly lower through June, the currency being primarily undermined by concerns over the UK’s economic trajectory.
Reports at the start of this week showed that pharmaceutical companies Astra Zeneca and Pfizer had recorded positive results from early human trials of a potential coronavirus vaccine.
This was a boost to the Australian Dollar after the threat of a second wave of coronavirus had been weighing on the ‘Aussie’ following lockdowns in Victoria.
Meanwhile, the Reserve Bank of Australia (RBA) warned of further fiscal support was required to limit the economic impact on the Australian economy from Covid-19.
Philip Lowe, the Governor of the RBA, warned:
‘We need to do what we can to limit the severity of these costly scars [owing to poor business and consumer confidence]. When the time does come to address the build-up of debt, the best way to do this will be through economic growth.’
Nonetheless, the Australian dollar has benefited from a boost to risk sentiment as hopes grow for a potential Covid-19 vaccine.
Stephen Innes of AxiCorp explains:
‘Risk assets are moving to the vaccine pump’s beat after it was raining positive vaccine trials overnight, and investors are still dancing in that rain.’
Additionally, the European Union’s agreement on a €750 billion coronavirus recovery fund has improved the outlook for the global economy’s recovery from the pandemic.
Looking ahead, Australian dollar investors will be paying close attention to Wednesday’s Australian Westpac Leading Index figures for June. Any improvement in Australia’s economy could boost the ‘Aussie’.
Wednesday will also see the publication of Australia’s flash Retail Sales figures for June. If these undershoot forecasts, then we could see concerns grow for Australia’s struggling economy.
However, if risk sentiment continues to grow on Covid-19 vaccine hopes and a recovery for the Eurozone’s economy, then we could see the ‘Aussie’ head higher as demand for risky assets grows.
Meanwhile, AUD traders will also be keeping a close eye on Thursday’s release of National Australia Bank’s business confidence report for the second quarter. Again, any signs that Australia’s economy could be on the road to recovery would prove AUD-positive.
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)