The Australian Dollar is extending gains for a second consecutive day versus its US counterpart, supported by the Reserve Bank Of Australia keeping interest rates on hold and risk on sentiment in the broader financial markets as economies gradually reopen.
At 14:45 UTC, AUD/USD is trading at +0.5% at US$0.6450, falling away from the upper end of the daily traded range of US$0.6417 – US$0.6776. The pair is up 0.85% so far this week, after rallying over 6% across April.
RBA Slightly More Hawkish Than Expected
The Australian Dollar is pushing higher on Tuesday after the RBA voted, as expected, to keep interest rates unchanged at the record low level of 0.25%. The central bank also announced that it was tapering its bond buying programme. Central Bank governor Dr Lowe appeared cautiously optimistic that Australia is ready for the next phase of the country’s fight against coronavirus. His tone was in sharp contrast to the grim tone of the past two meetings, helping to boost the Aussie.
Dr Lowe note that financial markets were “working more effectively than a month ago”. As a result, the RBA scaled back the size and frequency of its bond buying in a hawkish move.
A broad increase in risk sentiment is also supporting the perceived riskier Australian Dollar. As economies across the global gradually reopen their economies optimism of a global economic recovery is growing. Even oil, which has been trading at multi decade lows over the past few weeks, pushed back over $20 per barrel as fuel demand showed signs of rising.
Looking ahead Australian retail sales for March will be watched. The previous reading pointed to a record breaking 8.2% jump in sales as households stockpiled ahead of covid-19 lockdown.
US ISM Non-Manufacturing Beats Forecast
The US Dollar is clawing back losses after data revealed that the US economy was holding up mildly better than forecast during lockdown. The ISM non – manufacturing PMI dropped to 41.8 in April, down from 52.5 in March. Despite this being a record-breaking decline amid the lock down conditions, it is better than the 32 level that analysts were forecasting.