Australian Dollar Faces Data Drought, RBA Silent So Covid Will Drive

The Australian Dollar must contend with a notable lack of domestic economic events in the coming week, which is likely to leave it in thrall to global risk appetite and so, inevitably, to coronavirus headlines.

With nothing major due from Australia’s official statisticians or its central bank, the Aussie’s fortunes will be tied to the fate of other growth correlated assets, such as major stock markets and other commodity currencies.

To be sure all such markets have risen considerably from their contagion-inspired March lows. The forthright remedial action taken against an immediate ‘credit event’ by the world’s monetary authorities was behind much of this rise, with trillions of dollars of stimulus pledged to ward off the sort of implosion which took global markets down in 2008.

However, the certainty of world recession thanks to coronavirus lockdowns, and an ongoing procession of woeful employment data, has slowed this rise, with AUD/USD apparently stalled below key psychological resistance at A$0.66.

(Click on image to enlarge)

AUDUSD chart

The next monetary policy decision from the RBA is not due until June 2. Current market pricing as to what might happen then is on a knife-edge, with a historic, quarter-percentage-point reduction in the Official Cash Rate to zero favored, but only just.

However, such narrow pricing has been seen at the same distance from RBA meetings in the last couple of months, without a cut being delivered.

Still, the currency can hope for very little in the way of monetary support, but it’s hardly alone there. It’s more likely this week to be caught instead between the now familiar opposing forces of guarded optimism at economic emergency from lockdown and worries that the process will be far from swift. With this in mind, along with the sheer unpredictability of COVID news flow, it’s got to be a neutral fundamental call this week.


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