- Reopening of economies and potential covid-19 vaccine boosts risk sentiment
- Risk on trading lifts Australian Dollar
- US pending home sales beat forecast, consumer confidence worse than expected
- At 14:45 UTC, AUD/USD is trading +1.6% at US$0.664 a 10-week high
The Aussie Dollar is storming ahead against its US counterpart as the risk on mood in the markets weighs heavily on the US Dollar, whilst boosting the perceived riskier Australian Dollar.
At 14:45 UTC, AUD/USD is trading +1.6% at US$0.6647. This is at the top end of the daily traded range of US$0.6538 – US$0.6652 and a level not seen since the coronavirus spilled out of China in early March.
Optimism over the global economic recovery from the coronavirus pandemic and hopes surrounding a potential covid-19 vaccine are successfully offsetting elevated US – Sino tensions that tormented investors in the previous session.
Many countries across the globe including UK, US, Iran, and Japan announced easing lock down measures at the start of the week. Australia is also marching its way through the different phases of easing lock down measures with pupils returning to schools. Beauticians, clubs, bars and restaurants will be opening in the coming weeks in some states.
As investors become more confident over the prospects of the global economic recovery, they are more prepared to invest in riskier assets and currencies, such as the Australian Dollar. Safe havens, such as the US Dollar also become less attractive.
Investors have shrugged off slightly worse than expected US Consumer confidence data, whilst upbeat US pending homes sales aided risk appetite. According to a joint survey by US Census Bureau and US Department of Housing, pending homes sales rose by 0.6% in April, against a -21.9% decline expected. This was also up sharply from a -13.7% drop in March.
Whilst the US Dollar is falling away, investors are buying into perceived riskier stock, with the S&P 500 index above the 3000 level for the first time since late February.
Looking ahead, there is little of note on the US economic calendar on Wednesday. However, Thursday sees a slew of releases including US GDP and durable goods. These figures will help investors gauge the extent of the damage caused by the coronavirus crisis. Meanwhile initial and particularly continuing jobless claims could give clues as to the rate of recovery.