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Analysts at MUFG Bank assume the AUD/USD pair has hit a bottom but only a gradual move higher is likely until the coronavirus has been more clearly tackled on a global basis.

Key Quotes:

“The Australian dollar rebounded sharply in April as fears over the extent of the hit to Australia and global economies eased somewhat, helped by the policy responses and a slowing of the spread of COVID-19. The coronavirus risks diminished considerably for Australia. Australia has recorded just 93 deaths and the spread of the virus has fallen close to zero. That has encouraged a reversal of the lockdown measures in certain states, helping to restore confidence in the outlook for growth.”

“The extent of the rebound in AUD may also reflect valuation after sustained selling for a period prior to the onset of COVID-19. In the year up to the record high in US equity markets, AUD had weakened nearly 7% versus the dollar and was already at relatively cheap levels. The sell-off had in part been a reflection of the hit to global growth from the global trade war that undermined confidence in China.”

“Despite tackling COVID-19 better than most, the government and the RBA have designed a support package worth around 16% of GDP. According to the IMF, Australia’s actual real fiscal spend is the largest in the G20.”