The AUD/CAD currency pair plummeted to 0.83 from 0.90 in early-March during the first wave of the coronavirus pandemic. The pair, however, recovered subsequently and had been rising since the end of March, gaining about 15%. The pair is trading at 0.956 as of September 10, 2020.
Factors Leading to Bullish Run:
The rising trend is attributable to the recovery in prices of assets that were battered because of the coronavirus market crash. Moreover, the Reserve Bank of Australia has kept the cash rate unchanged at 0.25% and set the inflation target at 2 to 3%.
China, the largest trade partner of Australia, also resumed its trading with Australia following the resumption of industrial operations in China due to a slowdown in the number of coronavirus cases and easing of coronavirus restrictions in both Australia and China.
Factors affecting the Canadian Dollar and the AUD/CAD pair:
The Canadian dollar, on the other hand, remained under pressure due to lower oil prices during the period.
However, the recent surge in coronavirus cases in Victoria and the shutdown of Australia’s second-largest city, Melbourne, might signal the impending second wave of the pandemic, which can reverse the bullish run of the AUD/CAD pair.
Also, renewed concerns regarding the resurgence in the coronavirus cases across the world have put the oil under pressure once again, which is negative news for the loonie. To spur the economic growth, the Bank of Canada is expected to keep the interest rate at 0.25% until 2023. Canada lost over 3 million jobs during March and April pandemic lockdown, but 63% of the jobs have been recreated since then. The employment data for August shows a gain of 245,800 jobs, which is the fourth consecutive monthly gain in jobs. The unemployment rate of Canada now stands at 10.2% for August 2020.
Keeping in view the factors mentioned above, we might see the Canadian dollar under pressure if the oil prices remain low. It remains to be seen how the world grapples with the second wave of coronavirus and what impact it will have on the world economy.