The Australian Dollar has run into some resistance in today’s trading session after rallying the best part of 10% against its US counterpart on the back of an announcement by the Australian government for a support package to boost the economy
A $130BN jobs support package was announced which will see the government subsidise wages over the upcoming 6 months which is predicted to save significant amount of jobs and keep the economy afloat during this time as the coronavirus causes worldwide pandemonium.
The Chinese government has also announced a further range of stimulus measures to counter the effects of the coronavirus which is welcome news for the Australian economy as China is the country’s biggest trading partner. On top of recent rates cuts, China is expected to introduce a range of other measures in order to get the economy back on track
"While the 20bp cut is the biggest cut since the PBoC, we expect the Chinese authorities to focus mainly on lifting government spending rather than loosening monetary policy. Over the weekend, Chinese state media suggested the government will increase its fiscal deficit, issue special sovereign debt, and allow local governments to sell more infrastructure bonds," said Joseph Capurso, foreign exchange strategist at Commonwealth Bank of Australia.
Chinese Manufacturing PMI for March hot the market at 52.0, which was well above analysts expectations who were expecting a number of 45 and marks a sharp rebound from the disatourous figure of 35.7 recorded in February. Any number above 50 shows the sector in expansion mode and shows a remarkable recovery within the space of a month.
The news definitely shows there is still plenty of interest in the Chinese economy and once further confirmation comes that the coronavirus has been contained further, the numbers are only likely to get better which is great news for the Australian dollar.
"It does hold out hope for a relatively swift rebound in activity, a “V”shaped recovery, once the virus is contained," says Marshall Gittler, Strategist at BD Swiss.
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