Australian Dollar Outlook Hinges on Covid-19 Cases Ahead of RBA Rate Decision

Australian Dollar Fundamental Forecast, RBA, Covid-19, Commodity Prices – Talking Points:

  • The approaching prolongation of coronavirus lockdown limitation in Victoria, Australia’s second largest state, could bushel a Australian Dollar.
  • AUD could continue to trek aloft as a RBA shoots down unfamiliar sell involvement suggestions.
  • A short-term pullback in commodity prices might drag on a trade-sensitive currency.

AUD Fundamental Forecast: Mixed

The Australian Dollar’s over 30% convene from a yearly low can be attributed to 3 categorical pushing factors; a Reserve Bank of Australia’s position on disastrous seductiveness rate policy, climbing commodity prices and comparatively successful health outcomes in comparison to other grown economies.

Victorian Lockdown Measures Likely to be Extended

However, a postulated swell of Covid-19 infections in Victoria, Australia’s second many populous state, and flourishing clusters in New South Wales and Queensland bluster to hindrance a risk-sensitive currency’s run to uninformed yearly highs.

With a state of Victoria recording a towering 723 cases on Jul 30, Premier Daniel Andrews is roughly certain to extend stream stage-three restrictions over a due 6-week timeline as “the stairs we’ve taken are not enough” to conceal a rarely spreading coronavirus.

Daily Cases of Covid-19 in Australia (March – July)

Daily COVID Cases Australia

Source – Covid19Data

Stressing that there is no probability of “economic liberation unless and until we get these numbers down” Andrews, and Chief Health Officer Brett Sutton, are considering a probable deception of “New Zealand-style” lockdown measures as “nothing is off a table” after relocating to make mask-wearing imperative on Jul 19.

Considering stream restrictions are estimated to cost a internal supervision $1 billion a week, an prolongation of stage-three measures might drag on a opening of informal risk resources in a weeks to come. With a deception of ‘New Zealand-style’ restrictions approaching fueling a duration of poignant risk aversion.

AUD Forecast
AUD Forecast

RBA’s Stance on NIRP Underpinning AUD

The Reserve Bank of Australia’s position on Negative Interest Rate Policy (NIRP) has clearly underpinned a trade-sensitive banking as members of a executive bank “agreed that disastrous seductiveness rates in Australia sojourn unusually unlikely”.

Moreover, a RBA concluded “there is no box for involvement in a unfamiliar sell market, given a singular efficacy when a sell rate is broadly aligned with a elemental determinants, as during present”, with Assistant Governor Chris Kent stating that a Reserve Bank is “not overly concerned” by a new strength seen in a Australian Dollar.

Despite a weakening elemental backdrop Governor Philip Lowe and a cabinet are approaching to keep a executive money rate solid during 0.25% as a finish of a discussions “at a Jul Board assembly was that a best march of movement is to say a mid-March package and to continue to guard a effects of a pestilence on a economy.

To that end, a RBA’s wait-and-see proceed might continue to buoy a risk-associated Australian Dollar opposite a vital counterparts with a executive bank radically holding a shackles off a currency, assuring marketplace participants that a executive bank is “not formulation any choice policies during present”.

Market Implied Policy Rate for Australia

Market Implied Policy Rate for Australia

Data Source – Bloomberg

Commodity Prices Buoying a Trade-Sensitive AUD

As a commodity-linked currency, it comes as no warn that a GSCI commodity index’s 50% convene from a yearly low has mostly coincided with a Australian Dollar’s liberation from a Mar extremes.

However, a GSCI index has struggled to mangle above a sentiment-defining 200-day relocating normal (343.10) in new days, suggesting commodity prices might be due a short-term pullback.

Should that eventuate, a trade-sensitive AUD could remove belligerent opposite a vital counterparts.

On a other hand, a daily tighten above breakaway opening insurgency (346.8) might coincide with an prolongation of a Australian Dollar’s stand to multi-year highs opposite a haven-associated US Dollar.

SP GSCI Chart

SP GSCI daily draft combined regulating TradingView

— Written by Daniel Moss, Analyst for DailyFX

Follow me on Twitter @DanielGMoss

Slovenia Consumer Prices Rise In July

Slovenia consumer prices grew in July, total from a Statistical Office of a Republic of Slovenia showed on Friday.

The consumer cost index rose 0.3 percent year-on-year in July, reversing a 0.3 percent diminution in June.

Prices of food and non-alcoholic beverages grew 3.1 percent annually in Jul and those of diverse products and services increasing by 3.6 percent.

Prices for preparation and communication rose by 3.0 percent and 1.6 percent, respectively.

On a monthly basis, consumer prices fell 0.1 percent in July, after a 1.3 percent arise in a prior month.

Dutch Retail Sales Rise The Most Since 2005

Dutch sell sales rose for a second month and during a fastest gait in fifteen years in June, as spending recovered after a coronavirus pandemic-induced slump, total from a Central Bureau of Statistics showed on Friday.

Retail sales grew 9.8 percent year-on-year in June, following an 8.7 percent boost in May. Sales rose for a second uninterrupted month.

The latest expansion in sales was a biggest given 2005.

Sales of food and non-food zone increasing by 6.5 percent and 8.5 percent, respectively, in June.

Sales of shops in DIY articles increased, kitchens and floors for a fifth true month with double digits, a group said.

Online sales gained 45.1 percent compared to a same month final year.

The sell sales volume increasing 7.2 percent in June.

Swiss Retail Sales Rise In June

Switzerland’s sell sales increasing in June, information from a Federal Statistical Office showed on Friday.

Retail sales rose a working-day practiced 1.1 percent year-on-year in June.

Sales of food, splash and tobacco gained 5.7 percent yearly in June, and those of non-food zone rose 0.1 percent.

Other domicile equipment, textiles, DIY and seat grew 19.7 percent and sales of information and communication apparatus gained 43.8 percent.

Meanwhile, sales of other products fell 11.7 percent.

On a monthly basis, seasonally practiced sell sales decreased 3.8 percent in June.

In favoured terms, sell sales rose 0.4 percent annually in Jun and fell 3.6 percent from a month ago.

Yen Retreats As Japanese Authorities Warned Of Soaring Currency

The Japanese yen forsaken opposite a vital opponents in a European event on Friday, after Japanese officials warned opposite a strengthening currency, observant that they will guard a forex marketplace with a clarity of urgency.

Japanese Finance Minister Taro Aso cautioned that a yen is appreciating really quickly, that will impact authorities’ onslaught to boost outmost demand.

“Stability is important, so I’m closely monitoring it with a clarity of urgency,” he told after a cupboard meeting.

Officials from Japan’s Ministry of Finance, a Bank of Japan and a Financial Services Agency are holding a assembly to plead financial markets.

The yen’s arise came opposite a backdrop of gloomy U.S. GDP information for a second entertain and rising coronavirus cases universe wide.

The currency’s shelter was also aided by financier confidence over enlivening benefit updates from U.S. record giants Amazon, Apple, Alphabet and Facebook.

In mercantile news, industrial prolongation in Japan rose a seasonally practiced 2.7 percent on month in June, violence forecasts for a benefit of 1.2 percent following a 8.9 percent decrease in May.

The stagnation rate in Japan came in during a seasonally practiced 2.8 percent in June, violence forecasts for 3.1 percent and down from 2.9 percent in May. The job-to-applicant allotment fell to 1.11, blank expectations for 1.16 and down from 1.2 in a prior month.

The yen pulled behind to 104.86 opposite a greenback, from a 3-1/2-month high of 104.19 seen during 10:30 pm ET. The yen is seen anticipating support around a 108.00 region.

The yen enervated to 137.58 opposite a pound, a lowest turn given Jun 9. The subsequent probable support for a yen is seen around a 141.00 level.

Survey information from a Nationwide Building Society showed that UK residence prices suddenly rose in Jul as activity picked adult after a lockdown restrictions to conflict a coronavirus pestilence were eased.

The residence cost index rose 1.5 percent year-on-year after a 0.1 percent tumble in June. Economists had foresee a 0.3 percent drop.

The yen forsaken to 115.43 opposite a franc, representing a 1-week low. If a yen slides further, it might find support around a 118.00 level.

The yen eased to 78.10 opposite a loonie, from some-more than a 2-month high of 77.61 set during 12:00 am ET. On a downside, 80.00 is presumably seen as a subsequent support turn for a yen.

After rising to 75.01 during 11:05 pm ET, a yen retreated to 75.42 opposite a aussie. The yen is expected exam support around a 78.00 area.

The yen fell behind to 124.26 opposite a euro, not distant from nearby a 2-month low of 124.31 strike in a Asian session. The yen is staid to find support around a 126.00 mark.

Flash guess from Eurostat showed that a euro area economy engaged during a fastest gait on record in a second entertain amid a coronavirus pandemic.

Gross domestic product fell 12.1 percent on a quarterly basis, bigger than a 3.6 percent dump in a initial quarter. This was bigger than a economists’ foresee of 11.2 percent and was a sharpest decrease seen given a array began in 1995.

The yen showed a medium pullback opposite a kiwi, touching 70.9. Should a yen slides further, 72.00 is found as a subsequent support level.

Looking ahead, Canada GDP information for May and industrial product cost index for June, U.S. personal income and spending information for a same month and University of Michigan’s final consumer view index for Jul will be featured in a New York session.

Loonie Climbs Vs Most Majors Ahead Of Canada GDP Data

Statistics Canada will recover Canada GDP information for May during 8:30 am ET Friday. Ahead of a data, a loonie traded churned opposite a vital opponents. While a banking hold solid opposite a greenback, it modernized opposite a rest of vital rivals.

The loonie was value 78.17 opposite a yen, 0.9641 opposite a aussie, 1.5898 opposite a euro and 1.3422 opposite a greenback as of 8:25 am ET.