Home Forex News AUD/USD Under Pressure On COVID-19 Escalation In China

AUD/USD Under Pressure On COVID-19 Escalation In China

  • Australia economy concerns
  • COVID-19 threat
  • FED Governor Warning

AUD/USD recovery from a two-week low continues to gather pace amidst growing concerns about Australian economy recovery. The pair retook the $0.6900 handle, in early Wednesday trading session, after initially plunging to session lows of $0.6850.

AUD Weakness

The Australian dollar has remained under pressure amidst concerns that a prolonged COVID-19 pandemic will continue to hurt the economy. The pair has already retracted from three-month highs as a string of weak economic data continues to affect trader’s sentiments on the AUD.

Australia is vulnerable to a second wave of coronavirus infections, especially in China, its largest trading partner. China has had to close down parts of Beijing in the wake of new coronavirus cases; schools in the city remain closed.

While Australia has eased lockdown restrictions, businesses and companies are struggling to bounce back to pre-coronavirus levels. Conversely, more people are yet to go back to work with the unemployment rate projected to clock 18-year highs of 7% from 6.2% in April.

Uncertainty in the labor market is one of the developments that continue to weigh on AUD strength, conversely pushing the AUD/USD pair lower. The Reserve Bank of Australia has moved to curtail further weakness in the Australia economy with a wave of monetary policies. The purchase of government bonds is one of the tools used to boost liquidity levels in the marketplace.

AUD/USD Outlook

However, the RBA has refrained from using non-standard measures on optimism that the current policy measures will help revitalize the economy. Likewise, the AUD/USD pair should remain under pressure given the lack of new catalysts, highly needed to offer support to the AUD.

The Australian dollar could weaken further against the U.S dollar heading into the next RBA meeting on July 7. Renewed cases of COVID-19 cases in China should continue to weigh down the AUD strength, given that China is Australia’s biggest trading partner and a key driver of the export market.

The U.S Dollar also remains on edge as FED Chair Jerome Powell continues to paint a dovish picture about the U.S economy. This is despite retail sales in May, increasing by a record of 17.7%.


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