Currency Update - Wednesday 22nd January 2020

AUD

Risk came under fire with more cases of the deadly coronavirus
were reported outside of China overnight with a confirmed patient now in the
US. Fears have translated to losses in global equities in Asia, Europe and now
the US. Currency markets also reacted with traders trimming their risk
positions, putting the Australian Dollar on the backfoot. A fairly light day of
data today with only the Westpac Consumer Sentiment to account for but tomorrow
we’ll have Australian employment data which is coming off a big win in
December. We have a few examples earlier last year where big employment figures
are followed up the next month with less than inspiring figures so keep that in
mind if hoping to see a strong employment reading to help boost the Aussie.

USD

With risk off in play, the Australian Dollar came under selling
pressure against the greenback with AUD/USD being traded down to new lows of
0.6843 The S&P500 also found itself under fire as equities fell out of
favour coming off 0.2% in late trade while US yields took a hit with the
10-year falling 5bps. President Trump spoke at Davos where he lauded recent
trade deals and the strength of the US economy. He noted that the relationship
with China had never been better and that phase 2 trade talks would begin soon though
added that tariffs would remain in place during phase 2.  A quiet day
ahead on the data front as the US comes back to work  with little to
report.

EUR

The Australian Dollar has drifted lower as we open this morning
with markets trading at 0.6176, just below the familiar 0.62 handle. The Euro
found some strength with the release of a positive German ZEW survey for
January that printed at -9.5, up from -19.9 and better than expectations of
-13.5. However, Trump pumped the brakes, saying that he was “absolutely
serious” about imposing tariffs on European cars if a deal could not be struck
with the EU. A quiet day ahead with little in the way of data.

GBP

Pound Sterling has continued to mount pressure on the Australian
Dollar with markets trading AUD/GBP down to 0.5246 at time of writing. This
isn’t hugely surprising given that UK employment data was overwhelmingly
positive with 208k jobs added in the 3 months to November, up from 24k and much
better than expectations of 110k. The unemployment rate stayed at a
multi-decade low of 3.8% while average weekly earnings were steady at 3.2% to
beat expectations of 3.1%. Only a couple of minor impact releases today for GBP
so expect the positive sentiment to be maintained.

NZD

The Australian Dollar has once again found itself under selling
pressure against the Kiwi with markets trading AUD/NZD at 1.0376 at time of
writing. In the current risk off environment it appears that the Kiwi
has gotten the better of the Australian Dollar but in the absence of data
we can only attribute this to sentiment. No data out today.