Australian Dollar Fundamental Forecast, RBA, Covid-19, Commodity Prices – Talking Points:
- The likely extension of coronavirus lockdown restriction in Victoria, Australia’s second largest state, could hamper the Australian Dollar[1].
- AUD could continue to trek higher as the RBA shoots down foreign exchange intervention suggestions.
- A short-term pullback in commodity prices may drag on the trade-sensitive currency.
AUD Fundamental Forecast: Mixed
The Australian Dollar’s over 30% rally from the yearly low can be attributed to three main driving factors; the Reserve Bank of Australia’s stance on negative interest rate policy, climbing commodity prices and relatively successful health outcomes in comparison to other developed economies.
Victorian Lockdown Measures Likely to be Extended
However, a sustained surge of Covid-19 infections in Victoria, Australia’s second most populous state, and growing clusters in New South Wales and Queensland threaten to halt the risk-sensitive currency’s trot to fresh yearly highs.
With the state of Victoria recording a staggering 723 cases on July 30, Premier Daniel Andrews is almost certain to extend current stage-three restrictions beyond the proposed 6-week timeline as “the steps we’ve taken are not enough” to suppress the highly infectious coronavirus.
Daily Cases of Covid-19 in Australia (March – July)
Source – Covid19Data[2]
Stressing that there is no possibility of “economic recovery unless and until we get these numbers down” Andrews, and Chief Health Officer Brett Sutton, are contemplating the possible imposition of “New Zealand-style” lockdown measures as “nothing is off the table” after moving to make mask-wearing mandatory on July 19.
Considering current restrictions are estimated to cost the local government $1 billion a week[3], an extension of stage-three measures may drag on the performance of regional risk assets in the weeks to come. With the imposition of ‘New Zealand-style’ restrictions likely
