Currency Update - Monday 10th February 2020

AUD

Coronavirus continues to weigh heavy on risk sentiment, investor
attention firmly focussed on the spread and fatality rates released daily while
also looking for any further infections outside of China. With the extent of
the economic impact of the virus unclear, equity markets and risk assets (AUD
included) are doing it tough. As the death toll approaches that of the SARS
outbreak in 2002, oil was also down 1% amidst the fears around a potential
global slowdown. The week ahead is set to be dominated by sentiment as well,
the local economic calendar is bare, with a panel discussion including RBA Gov
Lowe on Thursday the only event of note. Chinese data is also light on the
ground this week, today’s CPI data the main event although unlikely to break
through the cacophony of C-Virus related headlines.

USD

AUD is on its haunches against USD, trading to new 10-year lows
of 0.6662 against USD over the weekend before opening slightly higher at 0.6672
this morning. A combination of strong US data, risk aversion and safe-haven
flows proving too much for the beleaguered local unit. The US employment report
was reasonably strong, the jobs numbers increasing by 225k; a massive 65k more
than the expected 165k. The unemployment rate unexpectedly rose 0.1% to 3.6%
though the participation rate unexpectedly rose 0.2% to 63.4%. Average earnings
data was mixed with hourly earnings up 0.2% in monthly terms to be short of
expectations of 0.3%, though in yearly terms it rose 3.1% to beat expectations
of 3.0%. Late the Fed released their semi-annual monetary policy report and
concluded that downside risks had eased late in 2019 though the coronavirus
outbreak was a new threat that could impact the global economy. We’ll have a
slow start to the week for USD data before CPI and Retail Sales on Thursday and
Friday evenings respectively.

EUR

AUD open this morning at 0.6096, giving up about 1% since Friday
morning against EUR under the weight of C-Virus related risk aversion. Not even
poor Industrial Production numbers from Germany and France could halt the
decline, AUD friendless whilst China continues to be overcome with new cases of
the virus. The week ahead is scattered with EZ data, ECB President Lagarde will
speak tomorrow night ahead of EU Economic Forecasts on Thursday night. Traders
will be sensitive to indications of expected slowdown as a result of the
ongoing health crisis.

GBP

AUD down here also, opening at 0.5173 at time of writing. There
was no data from the UK leading into the weekend, the moves driven entirely by
risk-related convictions. Brexit trade deal news has also gone quiet for the
time being. Tomorrow night the UK’s Prelim GDP and Manufacturing Production
numbers headline the economic calendar for the week ahead.

NZD

AUD has traded steady against NZD over the weekend, both
antipodeans equally impacted by risk-off sentiment, trading at 1.0412 this
morning. NZDUSD is firmly on the back foot in the same way as AUDUSD, just
holding on the 0.64 handle at the moment which is the lowest in over 2 months.
The RBNZ is in action on Wednesday afternoon, the cash rate expected to be left
steady at 1%.