- RBA warned of unprecedented economic contraction -10% in Q2
- Vaccine hopes boosting risk sentiment & demand for “riskier” AUD
- Fed Chairman Jerome Powell’s speech expected to keep pressure on USD
- At 14:00 UTC, AUD/USD is trading +0.3% at US$0.6545
After surging 1.7% across the previous session, the Australian Dollar is pushing higher again on Tuesday. The Australian Dollar US Dollar exchange rate settled on Monday, +1.7% at US$0.6525, at the high of the day on rebounding risk sentiment.
At 14:00 UTC AUD/USD is trading +0.3% higher at US$0.6545. This is at the upper end of the daily traded range of US$0.6510 – US$0.6564 following the release of the minutes from the latest Reserve Banks of Australia monetary policy meeting, amid vaccine optimism and ahead of a speech by Federal Reserve Chair Jerome Powell.
The Australian Dollar is extending versus the greenback despite the RBA’s latest minutes warning of unprecedented economic contraction ahead due to the coronavirus crisis. The minutes came from the meeting on 5th May where the central bank left rates unchanged at 0.25%, as expected, and said that it was committed to buying as much government debt as necessary.
The minutes showed that policy makers discussed a range of economic scenarios, with the baseline case being a -10% economic contraction in the first half of the year and a 6% fall across the whole of 2020.
Also underpinning the Australian Dollar was a broad risk rally thanks to optimism surrounding a COVID-19 vaccine. On Monday, US biotech company Moderna Inc reported that in a small sized, initial trial revealed that humans showed an immune response to its vaccine. Hopes of covid-19 vaccine sent global stock markets and the Aussie Dollar sharply higher at the start of the week.
There is no high impacting Australian economic data due to be released today. Investors will look ahead to a slew of numbers due to be released on Thursday including manufacturing PMI and a speech by RBA Governor Philip Lowe.
The safe haven US Dollar is trending lower, extending losses from the previous session as investors look ahead to a testimony by Federal Reserve Chair Jerome Powell this afternoon. Mr Powell, along with Treasury Secretary Steve Mnuchin testifying to the Senate banking committee on the US response to the coronavirus pandemic.
Powell is expected to pledge to keep rates low until the US returns to full employment and lean heavily into communication around the size and efficacy of what the Federal Reserve can offer. This could keep pressure of the US Dollar.