As infections continue to spread in most of the world, their effect is transferred to the economies too.
In China, a greater number of cities are tightening restrictions, while in Australia, the restrictions are expected to extend to a greater number of counties. In Japan’s capital Tokyo, the number of infections continues to increase, and in other Southeast Asian countries such as Thailand, they register new highs. In the U.S., infections have exceeded the maximum number of infected since last February, with a 60% rebound in the number of accumulated cases in the previous week. This figure is expected to continue to rise, but restrictions are not foreseeable because a large part of the population is already vaccinated.
As uncertainty surrounding the evolution of the pandemic continues in much of the world, its effects on the global economy are starting to get strong.
For example, the engine of the world economy, China, slowed its growth, as we have learned today after the publication of the Caixin PMI manufacturing figure for July. The economic indicator showed a decline to 50.3 from 51.3 last month, a level close to the pivot level of 50, representing the threshold of growth for the manufacturing sector.
All of this may affect the prices of raw materials. After a strong correction from recent highs, as occurred with Copper, the main industrial metal, prices have stabilized in the last week, awaiting more data on the evolution of the world economy.
This economic context could influence the Australian central bank meeting scheduled for tomorrow. Although no change in interest rates is expected, some economists and market analysts predict that the bank may increase the volume of asset purchases, thereby intensifying their expansionary monetary policy. This could hurt the Australian dollar price, which had already suffered a sharp decline that began in March of this year.
AUD/USD is near a price concentration zone around 0.7300 that acts as support below which it would make a bearish path towards levels around 0.7000. The daily RSI indicator has recovered from the oversold zone after the lateral consolidation of the last two weeks.
Sources: Bloomberg, reuters.com.
The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.
The research analyst is not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation or particular financial needs before making a commitment to invest.
The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.