• Vaccine optimism and coronavirus treatment developments boosted the Australian Dollar (AUD)
  • Thawing US – Sino relations also underpin risk sensitive Aussie Dollar
  • US Dollar (USD) picks up from sessions lows even as concerns grow over US economic recovery
  • Republican National Convention in focus

The Australian Dollar US Dollar (AUD/USD) exchange rate is trading higher on Monday, reversing losses from the end of last week. The pair settled on Friday -0.4% at US$0.7161. At 14:30 UTC, AUD/USD trades +0.2% at US$0.7176 as it eases off session high of US$0.7205.

The risk sensitive Australian Dollar initially soared in early trade, on hopes that the Trump administration would fast track vaccines and treatments for coronavirus.

Market sentiment received a boost after the US Food and Drug Agency approved blood plasma therapy as a treatment for covid-19. Furthermore, President Trump is considering by-passing regulation in order to accelerate an experimental vaccine.

Adding to the upbeat mood, White House officials have also reassured US business that the ban on Chinese social media app WeChat won’t be as broad and far reaching as initially feared. These comments have fuelled speculation that US – Sino tensions could be thawing, at least slightly.

As risk sentiment improved demand for riskier assets such stocks and riskier commodity currency like the Australian Dollar also rose.

After a weak start the US Dollar is slowly clawing back lost ground versus its major peers. There was little on the economic calendar to attract investor attention. The only release of note was the Chicago National PMI which showed that activity slowed significantly to 1.18, down from a record and upwardly revised 5.33 in June.

The big fear is that the economy has seen its sharp rebound after the covid lockdown and growth will now just move sideways from here.

There is no high impacting data due which means that the Australian Dollar and its US counterpart remains vulnerable to risk sentiment as it awaits the next catalyst.

Investors will be sure to glance towards the US Republican National Convention which will see Trump officially elected as the leader of the party ahead of the elections.