- Australia Retail Sales Spike
- Australia Economy Concerns
- Australia-China Standoff
AUD/USD recovery from 1-week lows gathered steam ahead of the U.S session on Friday, after grinding lower in recent days. More than 0.2% of the pair rallied on the confirmation that retail sales in the export-dependent economy rose 16.3% in May, after declining 17.7% in April.
For how long the AUD will continue to strengthen against the Dollar is still a point of discussion. For starters, the sudden spike in May retail sales data could as well attributed to revenge spending as lockdown restrictions were eased off in May. Economic data has disappointed in recent weeks, which explains why the pair has struggled to hold on to gains at three-month highs.
The Australian Dollar has continued to weaken against the Dollar on the Reserve Bank of Australia warning it could take much longer for the economy to bounce back following COVID-19. The unemployment rate has already notched to 19 year-highs, with the participation rate dropping to 62.9%, the lowest level since January 2001.
The Australian economy has shed more than 835,000 jobs since April, alluding to the slowdown in businesses in the aftermath of the COVID-19. Reserve Bank of Australia Governor, Philip Lowe, has already warned that the pandemic could end up costing the economy as much as AUD100 billion.
Prime Minister Scott Morrison’s warning of an increase in cyber-attacks in the country is another tailwind that could weigh on AUD strength in the forex market. The prime minister has confirmed a spike in cyber-attacks targeting government institutions as well as industries, political organizations, education, and healthcare sectors.
In addition, Australia finds itself entangled in a fierce political standoff with China, a move that has resulted in Beijing imposing tariffs on Australia’s exports. The tariffs came in the aftermath of Australia, questioning Beijing’s response to the Coronavirus outbreak.
That said, the Australian Dollar faces a string of headwinds that should continue to weigh on its sentiments in the forex market. Given that the Dollar tends to strengthen in crisis times, the AUD/USD should remain under pressure going forward.