Source: IG Charts
- The Australian Dollar[1] has risen sharply from its March lows
- Global economic shields against coronavirus have helped, as has the decision to leave local interest rates alone
- However this week is likely to bringworrying economic news
The Australian Dollar heads into a new trading week very close to one-month highs against its US cousin and well above the March lows which have marked, so far, the currency’s coronavirus-panic nadir.
The Aussie[2] has been lifted by forthright global efforts to shield economies from the pandemic’s worst effects, but also by its own central bank’s reluctance to cut interest rates to zero[3] for the first time. Futures markets had narrowly tipped such a reduction but the Official Cash Rate stayed at 0.25% on April 7. Oil[4] price rises have offered support to the broader commodity complex too and, with Australia a major raw material exporter, that’s likely good news for the currency. Signs of better economic activity in China have also helped.
However, Australia’s country’s prized, rare triple-A credit rating has been placed on negative watch by the S&P[5] Global agency. While this is clearly worse news it may not prove too damaging for the Australian Dollar as most of Australia’s peers have become accustomed to downgrades already, their national debts swelling as the cost of fighting the last financial crisis[6].
Still, the Aussie’s current relative vigor is surprising by most counts. Of course the coronavirus remains in charge of global markets, with shutdowns widespread and forecasts of global recession not hard to find. This is hardly an environment in which a growth-correlated currency can be expected to thrive for very long.
The coming week will bring news
