- Perceived riskier Australian Dollar (AUD) dropped on fears of second wave of coronavirus knocking the global economic recovery
- AUD recovered and safe have US Dollar (USD) declined after US Empire State Manufacturing index reignited hopes of a quicker recovery
- RBA minutes & US retail sales in focus on Tuesday
- At 13:45 UTC, AUD/USD is trading flat at US$0.6884
The Australian Dollar has clawed back earlier losses, picking up off the low of US$0.6776. The Aussie Dollar is now trading at break even at US$0.6864. This is at the top end of the daily traded range as risk sentiment shows signs of improving, after risk aversion dominated in the European session.
Fears of a second wave of coronavirus infections weighed heavily on risk sentiment at the start off the week, dragging the Australian Dollar lower, whilst boosting demand for the safe haven US Dollar.
Covid-19 cases are rising in in 24 states across the US at a concerning rate. Florida and Arizona are experiencing a record rise in cases a month after lockdown measures started to ease. A spike in cases in Beijing has also caught the attention of investors with lockdown being imposed in the parts of the Chinese city. Investors fear that lockdown restrictions being re-imposed could derail the fragile economic recovery.
US data helped lift the risk sensitive Aussie Dollar off session lows and move higher. The US Empire State Manufacturing Index, which rates business conditions for New York manufacturers, smashed analysts expectations in June, once again boosting hopes of a quicker economic recovery. The index printed at -0.2, well above the -27.5 analysts expected and a huge improvement on May’s -47.5.
Investors will now look ahead to US retail sales data tomorrow. Analysts are expecting US retail sales to jump +8% month on month in May, compared to a 16.4% decline in April. A strong report would add to evidence that the US economy was rebounding strongly.
Australian Dollar investors will look ahead to the release of the minutes from the latest Reserve Bank of Australia’s (RBA) monetary policy meeting held on 2nd June. Since this meeting RBA governor Dr Lowe has allowed some optimism to creep into his public comments. The minutes will be scrutinised for clues as to how the RBA sees its QE bond buying programme progressing. The RBA last brought bonds on 6th May.
