- AUD starts new month softer

- Aus coronavirus infection rate slows further

- But global picture unsupportive of AUD

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A fresh bout of Australian Dollar weakness after a short period of relative strength has allowed GBP/AUD to once again press higher and extend its medium-term uptrend.

The Australian Dollar continues to respect global investor sentiment and is therefore struggling on the first day of the new month amidst a fresh wave of selling in global stock markets.

The Australian stock market (ASX 200) had traded higher at the start of the new month but has since fallen into the red, adding to the 18% decline suffered in March; a trend that coincided with a 2.60% rise in the Pound-to-Australian Dollar exchange rate and a 5.35% fall in the Australian Dollar-U.S. Dollar exchange rate.

As long as global markets are moving lower we would expect the Australian Dollar to lose value and a snapshot of the world's leading indices confirms markets are currently witnessing a 'risk off' slump:

Above: A snapshot of global markets on April 01, courtesy of IG.

The fall in global investor sentiment comes as global investors take stock of the fact that there remains no medical solution to the coronavirus outbreak and a rapid increase in infections in Tokyo has fuelled speculation the government there would place the capital on lockdown. Meanwhile U.S. President Trump warned Americans for "very, very painful two weeks" and extended coronavirus guidelines after the White House estimated the death toll from the coronavirus could reach 240K, even with mitigation efforts.

"Although some countries in Europe hope to be approaching the peak of the pandemic in terms of daily infections according to the World Health Organisation, the situation in the US is intensifying," says George Vessey, Currency Strategist at Western Union. "On Monday, the US recorded 20,000 cases - the biggest daily rise in cases of any country since the coronavirus outbreak began in December. This occurred even after its daily rate of growth in cases slowed to 14% from 16% on Sunday. A model designed by the White House’s taskforce predicts as many as 240,000 people in the US could die from Covid-19."

The recession that world's economy has fallen into will be deep and remains largely incalculable at this stage, investors are therefore still faced with the kind of anxiety that tends to lead to the decline in the value of shares and 'risk on' currencies such as the Australian Dollar.

The Pound-to-Australian Dollar exchange rate is currently quoted 0.6% higher at 2.0318 while the Australian-U.S. Dollar rate is lower by 0.80% at 0.6075.

While the global picture remains unsupportive of the currency, the domestic picture is more promising. Analysis of coronavirus case data compiled by Guardian Australia shows the growth rate in new cases is now approximately 10% using a five-day average, compared with a high point of 27% on 22 March.

The federal chief medical officer, Prof Brendan Murphy, and the New South Wales chief health officer, Dr Kerry Chant, have both expressed qualified optimism about the numbers of new coronavirus cases being reported over the precent days. The charts showed good signs, they said, but there was a long way to go.

Further supportive factor that would be expected to play into the Aussie Dollar's favour is the sharp recovery in economic activity in China, which is Australia's main trading partner. We maintain the view that good news in China is good news for Australia and its currency.

However, it appears that for now it is the global environment that is holding more sway over the Australian Dollar than the domestic scene and here the news is not constructive.