Australian Dollar Fundamental Forecast: Bearish
- Australian Dollar[1] may fall as focus turns to external risks
- Traders may look past RBA minutes, Philip Lowe speech
- All eyes on rising US coronavirus cases, earnings season
The growth-linked Australian Dollar heads into next week anchored to how fundamental developments impact equities such as the Dow Jones[2] and S&P 500[3]. There will be a couple of domestic news flow to keep an eye on, such as the Reserve Bank of Australia meeting minutes on Wednesday. This will be followed by a speech from RBA Governor Philip Lowe.
The central bank appears to be in standstill mode on monetary policy. The board noted that it will not increase the cash rate target until progress is being made towards full employment and inflation is on a path to reaching sustainably between 2-3%. With that in mind, this will likely leave Aussie[4] pairs such as AUD/USD[5] and AUD/JPY[6] focusing on external news flow.
Australian Dollar External Risks: Coronavirus Cases, US Earnings Season
The aggressive recovery in global equities, particularly those from the US, has been a boon for the Aussie since late March. Lately, AUD/USD has been able to sustain highs despite rising cases of the coronavirus in Australia and in the United States. The latter has seen cases swell as deaths climbed 1,413 this past Wednesday, the most in almost 2 months.
Economists’ estimates for 2021 global GDP have remained unchanged thus far (see chart below). The Australian Dollar’s rise since March has been accompanied by hopes of a swift recovery in GDP. Thus far, rising cases have not yet materially altered the outlook for future growth. This could be due to investors seeing recent moves from
