The Australian dollar is strengthening for the ninth week in a row against the US dollar, and the AUD/USD has a chance to set the best winning streak in a decade. As recently as March, the exchange rate was in the area of 0.5500 and rose to the current level at 0.7200.
Australian prime minister Scott Morrison announced on Friday, August 21 that the Governor of the Reserve Bank of Australia (RBA) Philip Lowe asked politicians to increase public spending by 2% of GDP, i.e. by an additional 40 billion Australian dollars. According to the RBA, this will be an appropriate injection of spending to support the current difficult economic situation of the country.
Philip Lowe has identified three areas on which the government should focus its efforts. There is a need for continued income support for citizens, infrastructure programmes and training for workers in the energy, education, transport or hospitals, and business regulations must be facilitated through tax and regulatory reform. Job creation is to be a priority.
The Australian Prime Minister added that public spending must be coordinated and the RBA operates in the market to ensure that states can take out low-interest loans to finance spending.
Westpac Banking Corp. raised its year-end forecast for the AUD/USD pair from 0.72 to 0.75. The Australian dollar is expected to be positively impacted by the central bank policy, a package of government assistance and stable prices of iron ore, of which Australia is a major exporter. The AUD/USD forecast for 2021 has been revised from 0.76 to 0.80, due to, among other things, progress in the development of the COVID-19 vaccine, Bloomberg said, quoting Westpac note.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results.
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