Australian Leading Index Rises, Aussie Joins Other Commodity Currencies in Rally

The Australian dollar was one of the strongest currencies on the Forex market today, second only to the New Zealand dollar. The Aussie joined other commodity currencies in a rally, driven mainly by the positive general market sentiment, though decent domestic macroeconomic data and good news from the Victoria state were also helping.
 
The six-month annualized growth rate in the Westpac-Melbourne Institute Leading Index, which shows the likely pace of economic activity relative to trend three to nine months into the future, rose from –4.43% in June to â€“4.37% in July. Westpac’s Chief Economist, Bill Evans commented on the result:

The Index growth rate remains in deep negative territory consistent with recession. However, it appears to have bottomed out in April at -5.61% and, without the recent disaster in Victoria, it seemed certain that the June quarter would have marked the low point in the growth cycle.

He added further:

Victoria represents around 25% of national output. We expect the hard lockdown following the renewed virus outbreak to see the Victorian economy contract by 9% in the September quarter. That will offset the ongoing recovery we expect to be unfolding in other states as they continue to reopen, albeit at varying speeds.

For Australia overall, we expect growth in the economy to be flat in the September quarter before lifting by 2.8% in the December quarter on the assumption that Victoria moves through Stage 4 to Stage 2 and the other states avoid ‘second wave’ outbreaks.

The COVID-19 outbreak in the Victoria state was indeed the major source of concern lately, endangering the Australian economy, which otherwise weathered the global pandemic rather well. There was good news from the region, though, as the number of new infections is on the decline, reaching the lowest level in a month.
AUD/USD gained from 0.7242 to 0.7264 as of 13:41 GMT today. EUR/AUD felll from 1.6474 to 1.6445. AUD/JPY was up from 76.34 to 76.54. At the same time, AUD/NZD dropped from 1.0970 to 1.0933.
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