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Weekly Roundup: Shifting risk sentiment to drive the ‘Aussie’ this week

currency-newsWeekly Roundup: Shifting risk sentiment to drive the ‘Aussie’ this week
The Australian dollar (AUD) struggled at the beginning of last week after it was revealed that Japan’s economy – the third largest in the world – had suffered a sharper-than-expected contraction in business activity in July.

Consequently, AUD investors have become increasingly jittery over signs that the global economy could be heading for a recession much worse than previously expected.

Bernard Aw, the principal economist at IHS Markit, said:
‘While the easing of emergency measures provided some relief, especially to the domestic sector, Japan’s growth continued to be adversely affected by subdued global trade flows and restrictions on travel.’

The Australian dollar had started the previous week well, buoyed by improved risk appetite based on positive developments of a coronavirus vaccine.

Thursday also saw the release of Australia’s flash Commonwealth Bank Manufacturing PMI for July, which edged further into growth territory at 53.4, above 50 indicating growth. As a result, this provided a boost for the ‘Aussie’ owing to growing hopes for Australia’s domestic economy’s recovery.

Looking to this week, Australian dollar investors will be keeping a close eye on Wednesday’s publication of the second quarter inflation rate, which is forecast at -0.4% year-on-year, potentially weighing on the ‘Aussie’.

This Thursday will see the release of Australia’s Building Permits for June. If this improves, then the ‘Aussie’ may receive some support.

Meanwhile, AUD traders will be paying close attention to risk-sentiment. Any improvement in the global economic outlook – or stabilising Covid-19 cases worldwide – would buoy demand for risky assets like the Australian dollar.
 
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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