- US Dollar Weakness On COVID-19 Vaccine Optimism
- S-China- Australia Tensions
- Singapore Biggest Economy Contraction
The AUD/USD pair is back to one-month highs after coming under pressure amidst growing concerns over escalating diplomatic tension with Beijing. The pair bounce back comes at the backdrop of weakness on the U.S dollar as the COVID-19 fears continue to cool off.
The pair was up by more than 0.08% in early Tuesday trading session as reports of a potential coronavirus vaccine fuelled weakness in the U.S Dollar.
However, gains on the AUD/USD pair could be short-lived as the Australian dollar remains on the defensive amidst a wave of weak economic data. The Australian economy was severely hit in Q1 as the Coronavirus pandemic triggered a wave of lockdowns around the world.
The export-dependent economy came to a halt as China its biggest trading partner shut operations in and instituted lockdown to curb the spread of the virus. Likewise, Australia imposed lockdown restrictions as it also sought to bring the pandemic under control.
In the aftermath of the pandemic, Australia also finds itself at loggerheads with Beijing having joined a number of countries questioning response to the COVID-19 epidemic. A full-blown standoff with China is the last thing that Australia needs as it tries to bounce back from the pandemic.
The AUD/USD direction of trade would be on the spot as Prime Minister, Scott Morrison, issues a state address discussing the state of the economy. The markets also await commentary on the current state of Australia-Sino relations expected to take a toll on the AUD/USD Pair.
Singapore Dollar SGD also remains on the defensive against the U.S dollar as the island nation faces its biggest economic contraction since independence. Measures to contain the effects of the coronavirus pandemic have so far struggled to have the desired impact leading to weakness on the Singapore dollar.
With the government expecting the country’s SGDP to shrink by between 4% and 7% in 2020, SGD could weaken further against other major currencies.