The AUD to USD interbank exchange rate today is ranging between 0.6192 and 0.6250. Australia still has a relatively low number of Coronavirus cases with just over 6,100 compared with the big rise we have seen in the United States with over 435,000 cases. Australia’s figure is far smaller in comparison and as a result we could see a quicker recovery in Australia and their currency as their economy and health service come under less pressure.
Now that Wuhan in China is out of lockdown, the increase in production and the increase in supply and demand could also help Australia’s recovery. The close trading links between the two countries, means now that China has started to resume business, this in turn could help Australia with an increase in demand for their exports such as iron, coal and natural gas.
US increase stimulus further
In the United States, lawmakers on Wednesday prepared to increase fiscal support by hundreds of more billions that’s already totaled over $2 trillion. With the increasing number of cases in the United States it is no surprise to see a further round of stimulus to help support their population and companies, however as the number of cases has not peaked we might see further rounds of stimulus being announced in due course.
According to Morgan Stanley the Australian dollar could have upside potential that are driven by 4 main factors. Firstly, the interest rate in Australia is at their lower levels meaning any further interest rate cuts could be unlikely putting a floor on the AUDUSD exchange rate. Secondly, the US Federal Reserve gave swap lines to the Reserve Bank of Australia in mid-March to ensure it can inject US Dollar into their market if required. Thirdly, the direct link with an increase in demand in China increase demand in Australia. And lastly if the fundamentals in Australia start to come in better then again will help the Australian dollar.
With this in mind, if we see strength on the Australia dollar and weakness on the US dollar, we could see the Australian dollar to US dollar forecast come in higher.
US dollar data releases this afternoon
There are no significant data releases in Australia today, however there are a series of high impact data releases in the United States this after at 13:3 UK time. United States core production price index (PPI) for the month of March is released and is forecast to come in at 0.1% against a previous reading of -0.3%. US initial jobless claims are forecast at 5,250 thousand versus a previous reading of 6,648 thousand. US producer price index (PPI) for March is forecast at -0.4% against a previous reading of -0.6. At 15:00 UK time, the Michigan consumer expectations for April and Michigan consumer sentiment for April are published, with a forecast of 88.2 and 75.0 respectively.
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