The Australian dollar is trading at the interval for a third session on Tuesday as investors await a keynote speech from Federal Reserve President Jerome Powell at the Jackson Hole, Wyoming Central Bank Symposium.
Perhaps keeping a lid on prices is the sharp rise in U.S. government interest rates on Tuesday. Better-than-expected U.S. economic data could also push the Aussie to a holding pattern. In other potentially bearish news, the National Australia Bank (NAB) shot down GDP forecasts in response to the downturn in Victoria.
Kl. 16:04 GMT is trading AUD / USD 0.7174, up 0.0012 or + 0.17%.
Providing some support is the news that top trade representatives from Washington and Beijing had a call to discuss the implementation of their Phase 1 trade agreement. Australia is China’s largest trading partner. Increased demand for risky assets may also support prices following Monday’s news that the US Food and Drug Administration (FDA) approved the use of convalescent plasma as a treatment for coronavirus patients, although public health researchers and officials have questioned its effectiveness.
Powell speech to center on how the Fed sees inflation
Federal Reserve Chairman Jerome Powell speaks Thursday during a virtual version of the Fed’s annual Jackson Hole, Wyoming conference. He is expected to outline what could be the central bank’s most active effort ever to spur inflation back to a healthy level. The Fed is expected to use a tool called “average inflation”.
“Average inflation” targeting means that the Fed allows inflation to run higher than normal for a period of time.
Powell’s speech may also include a promise to keep politics as accommodating as possible until inflation and employment are both stabilized.
Growth forecasts cut for Australian economy
Growth forecasts for the Australian economy have been cut by NAB economists as they account for the economic impact of the shutdown in the state of Victoria, which is expected to knock 3% on the country’s total GDP.
The shutdown in the state of Victoria in response to another rise in the COVID-19 virus has dragged Australia’s economic recovery following an initial shutdown in March and April and will therefore ultimately slow down the rate at which Australia’s Reserve Bank can normalize its policy options by raising interest rates. and complete quantitative easing. ”
“The move in early August to list four restrictions in Melbourne, and Phase 3 for the rest of the state, and fears of further proliferation, has led to a significant downgrade of our economic outlook,” said Tony Kelly, senior economist at NAB. “The restrictions in Victoria could well reduce Victorian production by approx. 15% in Q3. Nationally, it would take about 3 percent of Q3 GDP. ”
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