- Riskier Aussie Dollar (AUD) rallies as vaccine hopes boost risk appetite
- China warns against travel to Australia on grounds of racism
- Chinese trade data in focus
- US Dollar (USD) out of favour as investors look to US earning season with cautious optimism
The Australian Dollar US Dollar (AUD/USD )exchange rate booked mild gains across the previous week, closing on Friday at US$0.6949. At 13:30 UTC, AUD/USD trades +0.3% at US$0.6980. This is at the top end of the daily traded range.
The perceived riskier Aussie Dollar is benefiting from the broad risk on sentiment across financial market. Risk sentiment has received a boost ON upbeat news surrounding coronavirus treatments. A recent study showed that Remdesivir, the coronavirus treatment from Gilead reduces the risk of death in severely ill covid-19 patients by 62%.
Adding to the upbeat drug developments Pfizer and BioNTech also announced that the vaccine candidate that they are working on together has been fast tracked and could receive FDA approval as soon as December.
A vaccine is the surest way for global economic growth to return to levels seen pre-covid-19. As a result, markets are particularly sensitive to vaccine news flow and developments.
Optimism surrounding drug treatments and vaccines overshadowed concerns of rising coronavirus numbers in both Australia, which has seen Melbourne go back into lock down, and the US which continues to experience over 60,000 new daily cases over.
Investors have also shrugged off reports that China’s ministry of foreign affairs has warned against travel to Australia amid anti- Chinese sentiment and racism. The move highlights souring diplomatic ties between the two nations.
Looking ahead Aussie Dollar investors will focus on Chinese trade data due for release in the Asian session on Tuesday. Analysts are expecting imports to be -10% year on year in June, a vast improvement from last month’s -16% decline year on year. Exports are also expected to improve down -1.4% after declining -3.3% in May. Overall, this would support the view that the Chinese economy continues to recover. Strong readings could boost the Aussie Dollar which is also considered a Chinese proxy.
Higher risk appetite, in addition to cautious optimism surrounding earning season, which begins today is weighing on demand for the safe haven US Dollar. Big names across corporate America will provide details on the impact of the coronavirus crisis and could provide further insight into the outlook for the coming quarter. The bar has been set low so any hint of optimism could lift sentiment.