The Governing Council of the Reserve Bank of Australia will be meeting this Tuesday and will be discussing the country's current economic outlook in the wake of the coronavirus pandemic.
The Council held two emergency meetings last month, as the economic fallout from the global crisis was beginning to pick up speed, on which the RBA decided two cut the OCR to 0. 25 basis points. Additionally, the central bank decided to increase its asset-purchasing program to boost the underlying liquidity.
Apart from China, Australia was the first advanced economy to feel the considerable economic strain from the situation due to its dependency on the uninterrupted functioning of the global supply chains.
Moreover, Australia’s trade interests are quite closely tied to China, which is why its current account is so severely distorted in Q1.
There are, however, reasons to be optimistic for the long term welfare of the Australian economy now that Chinese individuals are returning to work and trade between the two countries may soon start recovering to its pre-crisis levels.
The Governing Council is almost certainly going to remain on its present course that was implemented last month, as the country still struggles to recover from the initial impact of the epidemic. At most, the RBA might decide to ramp up its efforts if the Council deems it necessary.
“The Board will not increase the cash rate target until progress is being made towards full employment and it is confident that inflation will be sustainably within the 2–3 per cent target band. […] Australia's financial system is resilient and well placed to deal with the effects of the coronavirus. The banking system is well capitalised and is in a strong liquidity position. Substantial financial buffers are available to be drawn down if required to support the economy.”
The massive pressure that has been exerted on the Australian dollar continues to weigh down on the currency, as the Aussie was already reeling due to the bushfires that were raging prior to the outbreak of the coronavirus.
Meanwhile, the AUDUSD appears to have found strong resistance from the major price level at 0.62000, and the pair is currently consolidating below it.
AUDUSD 4H Price Chart. Image source: Trendsharks ©, created with TradingView.com
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