USD Slump Causes Australian Dollar to US Dollar (AUD/USD) Exchange Rate to Recover from Decade Worst

Australian Dollar to US Dollar Exchange Rate Climbing despite Gloomy Australian Outlook

Concerns over China’s economy and the global spread of the coronavirus are keeping the Australian Dollar (AUD) unappealing, but the Australian Dollar to US Dollar (AUD/USD) exchange rate is still recovering today. As coronavirus jitters hit the US Dollar (USD), AUD is recovering more easily.

The Australian Dollar’s bearish streak continues overall, and AUD/USD has seen notable losses this week.

Since opening the week at the interbank level of 0.66, AUD/USD has slipped a cent and a half to trend near the level of 0.65. AUD/USD has recovered slightly from this morning’s worst levels, which were the lowest levels for the pair in over a decade.

There is no notable Australian data due for publication until next week. As a result, US data and coronavirus news driving the US Dollar are most likely to drive movement in the Australian Dollar to US Dollar exchange rate.

Australian Dollar (AUD) Exchange Rate Recovers amid Rival Weakness

The Australian Dollar (AUD) has seen weeks of poor performance.

As a currency correlated closely to China economic sentiment, it has seen much of the brunt from developments over the coronavirus this year.

Today has seen the Australian Dollar rebounding solidly from its worst levels in years against the US Dollar (USD).

However, this has been more due to broad losses in the US Dollar than any ‘Aussie’ strength.

According to Petr Krpata, Analyst at ING, there is still a lot of downside pressure facing AUD:

‘The Australian Dollar has been the key G10 underperformer in the past few days as virus-related fears rose again. Despite yesterday’s stabilisation in risk sentiment (triggered by a recovery in equities), selling pressure on AUD has continued to mount’

US Dollar (USD) Exchange Rates Slump as Coronavirus Fears Hit the US

The US Dollar (USD) has seen deepening volatility this week, as the coronavirus Covid-19 continues to spread outside of China.

The US Dollar briefly recovered in the middle of the week, as Federal Reserve officials showed confidence in the resilience of the US economy.

However, market fears of the virus’ potential impact on the US economy only worsened again last night. US President Donald Trump attempted to calm concerns in a speech, but markets perceived his tone as underestimating the potential impact of the virus.

Due to fears that the US government may not do enough to prevent the spread of the virus, Federal Reserve interest rate cut bets rose. Analysts are now pricing in a rate cut as soon as April, with three total over the coming year.

According to Thu Lan Nguren, Analyst at Commerzbank:

‘Rate cut expectations have gained momentum and US rate expectations are falling a lot more than they are in the Eurozone,’

Australian Dollar to US Dollar (AUD/USD) Exchange Rate Awaits Key US Data

For now, AUD/USD is recovering as Covid-19 fears hit Federal Reserve speculation and the US Dollar (USD).

However, the outlook for the pair is still low as the coronavirus poses a significant concern to Australia’s outlook.

As a result, AUD/USD may struggle to sustain more solid gains unless the US Dollar sees more notable weakness. With key US data due through the end of the week, there is potential for shifts in movement ahead.

US durable goods orders and growth stats will be published this afternoon and could prove significant if they surprise investors. Weaker than expected US growth data could cause concerns of US economic resilience to rise and the US Dollar would weaken.

Tomorrow’s US PCE inflation data could also be influential and could cause further Federal Reserve interest rate cut bets if they disappoint.

As for the Australian Dollar (AUD), it will remain sensitive to coronavirus developments. Overall though, the Australian Dollar to US Dollar (AUD/USD) exchange rate will react most to US Dollar strength in the coming sessions.

Josh Jeffery

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