- AUD/USD trades in the red despite China’s MLF rate cut.
- Gilead’s coronavirus drug fails in first trial, weighs over risk sentiment.
The Aussie dollar is flashing red alongside losses in the US stock futures despite China’s MLF rate cut.
AUD/USD is trading at 0.6354 at press time, representing a 0.25% loss on the day and the futures tied to the S&P 500 are down 0.70%.
The People’s Bank of China (PBOC) injected 56.1 billion Yuan into the system via targeted medium-term lending facility (MLF) operation. Notably, the central bank cut the interest rate on the 1-year targeted MLF to 2.95% from the previous rate of 3.15%.
So far, the MLF rate cut has failed to put a bid under the AUD, a proxy for China, possibly because the amount of liquidity injected by the latest MFL operation is significantly less than the 267 billion yuan worth of MLFs maturing today. Essentially, more than 200 billion yuan are set to exit the system.
Also, markets turned risk-off during the overnight trade, weakening the bid tone around the Aussie dollar after a report said that Gilead medicine’s experimental drug for coronavirus performed poorly in a test.
Additionally, expectations of a quick economic recovery continue to dwindle with major economies struggling to reopen their economies. The latest Reuters poll of economists from across the globe shows the global economy is expected to see the sharpest contract on record in 2020 due to the coronavirus pandemic-led lockdowns and stall in business activity.
However, it’s worth noting that the passage of the $484 billion aid package by the US House is a positive development for the risk assets. As a result, both stocks and AUD are unlikely to suffer big losses.
Technical levels
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