Subdued start to the week for AUDGBP, AUDEUR and AUDUSD as the markets await for tonight’s mixture of surveys from down under and long stream of economic data from Australia’s leading trading partners to set the AUD onto it’s trend for the week.
The AUDGBP rate has edged dangerously closer to it’s key resistance levels of 0.56, a mark we have only seen breached 4 times since the start of 2018 and certainly triggering the best opportunity to buy pounds with Australian dollars so far in 2020.
Conversely, the aussie dollar has continued to tread water against the US dollar and has even seen its end of spring gains against the euro begin to reverse back down towards the mid 0.52s on interbank exchange rates. It will be interesting to see if these levels are tested once more with key consumer data out for Europe’s heavy weights France and Italy due to attract attention this morning along with GDP figures due from Spain. Rising debt levels in Spain have long been a focus for the European Commission and the International Monetary Fund and so the markets will be holding out for a pick up here, particularly as tourism across the bloc begins it’s rebirth since the lockdown.
Against the dollar, Australian dollar holders will be looking to Friday’s employment data to surprise the markets and help AUDUSD break out of current ranges. Investors have used the US jobs market as a gauge for economic resilience in the States ever since the virus took hold. The Federal Reserve (Fed) has been forced in to making record breaking adjustments to their policy to help protect lending conditions and keep the opportunities for the US workforce to remain active. Further rises in jobless claims could force the Fed into further concessions which in turn might weaken the US dollar’s proposition on the international stage.
Perhaps this switch in fortunes against its major currency counterparts reflex a slight contraction in risk appetite across global markets as spikes of new COVID-19 cases continue to resurface around the globe. Fear of this nature generally tends to lead to investors reshuffling their commitments from riskier developing currencies like the Australian dollar and to an extend the pound (as a result of the Brexit uncertainty) towards safer, more stable currencies like the US dollar, the euro and the Swiss franc. The shift in balance between the pound and the Aussie dollar is testament to how well viewed the AUD is. It will be interesting to see if the AUDGBP rate will continue to rise if this trend begins to truly take hold during the weeks and months ahead. This morning’s early releases highlighted yet again the considerable pressure the UK economy currently finds itself under. With UK GDP continuing to contract Year on Year and total business investment within UK PLC grinding to a standstill, it is hard to build a substantial case for renewed sterling strength in the short term at least. Perhaps as the government moves closer to abolishing quarantine rules with it’s European counterparts, other vital contributors to the UK’s net services offering will be able to play their part in helping the United Kingdom find it’s feet once more.
Business Owners Boosted by Australian Government’s Promises
Those looking to buy Australian dollars may have hoped that the growing concerns of a second wave hitting Australia might force the government to immediately reverse the gradual easing of social distancing rules we have seen in recent weeks.
Australia posted it’s biggest rise in cases in over 2 months at the end of last week which accelerated speculation. However Prime Minister Scott Morrison confirmed all states remain committed to reducing social distancing practices enabling economic activity to rebuild a path back towards the levels seen at the start of the year.
It will be interesting to see if this is reflected in this evening’s survey from the manufacturing survey. Business confidence globally had hit record lows throughout the spring which in turn had variable effects on the currency markets depending on the region.
Similar releases are due for China and Japan overnight as well. As Australia’s 1st and 2nd leading trading partners respectively, positive releases here could bolster investor appetite for the Australian dollar as this would reflect stronger more stable trade alliances for the future, both of which are pivotal qualities for commodity based currencies such as the Australian dollar.
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