The Australian dollar is not the destination of choice in times of global economic uncertainty. The Australian dollar is a riskier, commodity based currency and so it will remain vulnerable until we see a viable solution on COVID containment.
The Australian dollar is heavily reliant on China purchasing its goods and services. If China’s growth falls expect it to have a negative effect on the Australian economy and in turn the Australian dollar. It could prove valuable to keep an eye out for data releases from China as well as Australia as this could provide valuable information on both economies and assist in helping you make a decision as to when to trade and maximising your return.
There is little data of consequence set to be released this week, although next Wednesday could give some insight as to the state of the Chinese economy.
We will witness the release of non-manufacturing Purchase Managers Index (PMI). This will give us an idea as to how areas of business are performing excluding manufacturing, as the name suggests. A figure above 50 indicates growth. The previous months figures landed at an impressive 55.2 although it is predicted the latest data release will show a fall to 52.1.
We will also see Manufacturing PMI. There is expected to be little movement from the previous month. Last month’s data landed at 51 and the prediction is for it to land at 51.2.
If the figures land close to expectations do not expect huge swings in currency value. The market moves on rumour as well as fact so the predictions are likely to be somewhat factored in. If figures arrive away from expectations that is when you can expect significant change in currency value.
The Australian dollar is likely to remain fragile against the majority of major currencies until we see an increase in risk appetite from investors. This will only likely occur when we have some from of solution for the Coronavirus.
The Reserve Bank of Australia (RBA) have stated that they are prepared to use all the tools at their disposal in order to combat any economic downturn caused by the pandemic. If we are to witness a cut in interest rates expect the Australian dollar to suffer.
One of the majors that could be considered to be in a worse spot than the Australian dollar is Sterling. The pound is extremely fragile due to not only the threat from the increase of those infected by the Coronavirus, but also Brexit.
Further lockdown measures are set to hurt the UK economy and with Boris now stating a Brexit deal must be in place by 15th October things could get worse for the Pound.
Key issues such as fisheries and the internal market bill are yet to be resolved and it seem Johnson is already prepping British citizens for a no deal scenario. Keep this in mind if you are hoping for gains against the Aussie short term. Get in touch using the form below to discuss these factors in more detail to see how your Australian dollar exchange could be impacted.