New lockdown and impact on AUDUSD

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Australia is returning to new restrictions. The low vaccination rate in Australia, combined with the rapidly spreading delta variant, means that Australia is preparing to fight to keep the virus inside the country. Australia’s strict covid management creates an asymmetrically limited risk profile upwards for AUD relative to other G10 currencies, despite strong local economic performance so far. The still slow pace of vaccination and the approach of zero tolerance towards infected infections suggest that Australia will continue to be exposed to the possibility of further blockades in the third quarter of this year.

The recent stabilization of iron ore prices also suggests less potential for further improvements in the balance of payments support picture if price growth does not continue. Wage growth and inflation remain well below the target. As long as this is the case, the RBA is likely to remain cautious, and markets will not be willing to appreciate, in the event of a faster decline in policy incentives in advance and/or independently of the Fed. This puts the AUD at a disadvantage compared to currencies in which changes to the hawkish policy are more actively discussed. This may change but probably requires a clear change in wage data and consumer prices. The RBA will meet next week with a new look at interest rates and potential economic stocks.

New Australian housing loan liabilities rose to a new high in May, data from the Australian Bureau of Statistics showed today. New home loan commitments rose 4.9 percent in May to a new high of $ 32.6 billion, driven by commitments for investors.

The value of new loans for housing investments increased by 13.3 percent to 9.1 billion US dollars, which was the highest level since June 2015. New loan obligations for tenant owners rose 1.9 percent to $ 23.4 billion, the highest level since the series began.

However, for the third month in a row, there was a drop in the value of loans taken for housing land and the construction of new apartments, ABS said on Thursday.

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