AUD Hanging On as Sydney Outbreak Escalates
AUD
The AUD had a mixed session on Friday night, with some gains being made against the USD and EUR. US Equities reached record highs with the three major US Equity Indices all gaining over >1%, while US interest rates remained relatively flat. The VIX, which is an index that measures the level of risk and fear within the market, dropped -14.8% over the weekend. The AUD commonly thrives in a market with positive risk sentiment, as such the movement could have also aided the AUD. However, if Sydney continues to fail in controlling the recent Covid outbreak, we could see risk sentiment play a bigger part. Commodities also finished in the green, with Iron Ore and Copper both gaining 1.1% and 1.7% respectively. As a commodity currency, the AUD likely gained some support of the back of these commodity movements. The AUST and US 10 Year Bond Yields are now sitting at a relatively equal level, meaning investors fail to gain any extra interest by investing in Australia, which may reduce demand for the AUD. Markets will be watching for the release of China’s Trade data tomorrow, with investors speculating against China’s export figures that have seen a drastic increase due to the stimulus in the U.S. The big local release for the week will be Thursday's Employment data which is under pressure to back up after a stellar reading last month.
USD
The AUD/USD had a decent rally leading into the weekend however still finished last week in the red, currently trading at a rate of 0.7488 at time of writing after plumbing new 6-month lows of 0.7410 on Friday. US Equities had a strong performance on Friday night, with the S&P500 and NASDAQ gaining 1.1% and 1.0% respectively. Due to the AUD’s recent high correlation with US stocks, this could have also supported the AUD in gaining back some lost ground. Investors in waiting for the US Monthly CPI data, which is due to be released on Tuesday night. Markets will continue to monitor Inflation levels, as it may aid investors in gauging the FED's QE and tapering policy.
EUR
The AUD/EUR has also managed to make some significant gains, currently trading in at rate of 0.6305 at time of writing. European Equities also finished strong on Friday night, with the CAC and DAX both gaining +1.7% and 2.1% respectively. However, the EUR was still rather soft against the AUD, allowing the AUD/EUR to move back in the 0.6300s. A quiet day ahead, with no significant data scheduled to be released.
GBP
The GBPAUD is traveling at around the same levels as last week, currently at a rate of 0.5386 at time of writing. The UK had some weak data releases late on Friday night, with May GDP coming in at 0.8% (vs exp 1.5%), Industrial Production gaining 0.8% (vs exp 1.4%), and Manufacturing Production losing -0.1% (vs exp +1%). Despite the weaker data, the AUDGBP failed to make any significant gains. BoE’s Governor Bailey emphasized the importance for the UK to improve productivity growth, in order for the economy to effectively recover from the Covid-19 Virus. No significant data booked for today, with the BoE’s Financial Stability report scheduled to be released tomorrow afternoon.
NZD
The AUDNZD currently trading in relatively tight regions, currently coming in at a rate 1.0686 at time of writing. Markets currently in waiting for the RBNZ’s Rate Statement scheduled to be released mid-Wednesday. The RBA recently emphasized that they would not adjust interest rates until 2024, if the RBNZ was to project a more Hawkish stance towards their monetary policy, the AUD could experience some pressure to the downside.