AUD/USD Reaches 6-Week High Amid Easing Restrictions

AUD/USD rallied to its highest level since March 11 in early trading on Tuesday, as Australia stands out as one of the countries having best managing the Coronavirus pandemic. The country responded quickly, closing its borders and imposing restrictions on movement. With new cases falling sharply over recent weeks, Australia began to ease social distancing restrictions. Sydney’s famed Bondi beach was reopened on Tuesday to local swimmers after a month-long closure.

Over two million Australians have downloaded the CovidSafe app since its launch on Sunday. The smartphone app is designed to help medical workers and state governments trace close contacts of Covid-19 patients and is based on one introduced in Singapore.

Australia has so far confirmed roughly 6,700 coronavirus cases and only 83 fatalities. The figures stand in contrast to the figures reported by hard hit countries such as Italy and the United States. Australia’s largest trading partner, China, has restarted production. The data suggests that Australia will be able to open their economy long before other countries, which in turn will put the Australian dollar at a competitive advantage.

Research from Johns Hopkins University shows that coronavirus COVID-19 global cases have risen to 3,050,308 with 211,326 fatalities. In the US, restaurants across Tennessee opened for the first time in nearly a month on Monday, despite a jump in new cases in the state the previous day.

Looking at the AUD/USD daily chart with an overlay of the S&P 500 (in orange), we can see that the risk sensitive Australian dollar has a strong positive correlation with the benchmark index. The 5 largest members of the S&P 500 are reporting earnings this week. While the positive Coronavirus related news underpins the Aussie, surprises to the downside in earnings may have a ripple effect if equities come under pressure.