The Australian dollar was demonstrating an impressive performance so far in April. But can the currency maintain its upward momentum this week? Market analysts have doubts about that.
The Aussie looked surprisingly resilient considering that the coronavirus pandemic rages on, making safe options more appealing to investors than riskier ones. But the currency of Australia managed to log sharp gains last week despite that. Experts speculated that the currency got support from the decision of the Reserve Bank of Australia to avoid cutting its key interest rate to zero percent. They also pointed out that the Financial Stability Review showed that Australia’s economy is in a difficult but not disastrous position.
Yet this week’s macroeconomic data in Australia can put an end to the Aussie’s good performance. Traders’ focus is centered on the employment report from the Australian Bureau of Statistics that will come out on Thursday. Australia’s employment enjoyed four consecutive months of growth, including February when it demonstrated a solid gain of 26,700 jobs. But data for March will most likely be far worse. Specialists predicted that the report will show a drop of 30,000. Furthermore, they predicted that the unemployment rate will rise from 5.1% to 5.4%. That can seriously hurt the appeal of the Australian currency.
On Friday, China will release a report on gross domestic product in the first quarter of this year. The Asian nation is the biggest trading partner of Australia, making Australian economic data very important for the performance of the Australian dollar. Experts predicted that the report will show contraction by 6.0% after the economy expanded at the same rate in the previous three months. Plenty of other reports in China are also scheduled for Friday. Unsurprisingly, the market consensus is that they will not show good results. Saying that, the consensus forecast predicts that the data for March will not be as bad as for February as the Chinese economy is slowly recovering from the virus outbreak.
With the current risk-averse trading environment, it will be surprising if the Australian dollar will be able to keep its winning streak for long, and analysts are bearish on the currency. Forex Crunch issued a bearish forecast for AUD/USD and said:
With the CORVID-19 crisis still in full gear, financial markets remain volatile. Minor currencies such as the Aussie are likely to remain under pressure.
DailyFx echoed such sentiment, issuing a bearish forecast on the Aussie and saying:
Still, the Aussieâs current relative vigor is surprising by most counts. Of course the coronavirus remains in charge of global markets, with shutdowns widespread and forecasts of global recession not hard to find. This is hardly an environment in which a growth-correlated currency can be expected to thrive for very long.
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