Currency Update - Monday 3rd February 2020
AUD
Coronavirus fears continue to dominate markets globally with
equity markets posting losses and currency markets seeing safe-have flows.
China’s equities markets are due to return today after the Lunar New Year break
and will no doubt face heavy selling pressure despite a pledge from the PBOC of
150 billion yuan ($21.7billion) in liquidity. AUD is firmly on the back foot
against the majors and faces a big week of economic data ahead. AUD is finding
it hard to benefit from positive economic data with the background of the
Coronavirus, its propensity to fall seems overpowering at the moment. Today’s
building approvals will likely come and go without fanfare and tomorrow’s RBA
interest rate decision is expected to result in interest rates remaining
unchanged (22% chance of a cut). Later in the week we have local Retail Sales
and Trade Balance figures and there’s Chinese data interspersed throughout the
week however it’s too early to expect Coronavirus-related impacts to bear any
impact on the numbers.
USD
AUD traded heavily into the weekend, opening at 0.6686 this
morning and seems set to re-test the 10-year lows from October. US equities are
feeling the effects of Coronavirus fears, the S&P 500 and Dow both having
erased all of the gains seen so far in 2020, however the USD is strong,
benefitting from flight-to-safety trading. US data was mixed on Friday night,
the risk-off trading sentiment dominating currency moves as supposed to the
data. Plenty of data from The States for the week head, ISM Manufacturing PMI tonight
and the monthly employment report at the end of the week. There’s also a good
chance Trump’s impeachment circus will come to a predictable conclusion later
this week with the Senate due to vote, a guilty verdict presenting a massive
outside longshot.
EUR
AUD under the pump here too, opening at 0.6025 this morning
which are fresh 5 month lows. European data leading into the weekend was on
balance, disappointing, so it’s clear the risk-off effects of Coronavirus
apparent for AUD are obviously not isolated to the Greenback. EZ PMIs are due
for release tonight which under regular trading conditions would garner
interests from traders, however will likely offer little impact to currency
markets, with more sensational and emotional headlines taking center stage. ECB
President Lagarde is due to speak on Thursday and may attract some interest,
especially if she addresses the virus spread and the success of European
containment measures.
GBP
Brexit is done! The UK finally exited the EU at the weekend, now
there are 11 months to negotiate the trade deal post-Brexit. All of the Brexit
fear-mongering so far has proven to be hot air, the sun still rose on Britain’s
green hills on 1st Feb. AUD opens lower at 0.5072 this morning for
fresh 3 ½ year lows, the GBP continues to be strong in the aftermath of the
BoE’s decision to leave interest rates on hold late last week. A quieter week
of data ahead for the Pound, tonight’s Manufacturing PMI the highlight.
NZD
AUD is steady against NZD, both Antipodeans suffering equally in
the face of Coronavirus fears. We open at 1.0346 which is towards the bottom of
the year’s range to-date. A busy week for data from NZ, with employment data
due for release on Wednesday morning, followed by Inflation Expectations on
Friday. 6 month lows are within reach for AUD, any test of 1.0305 will be
important for technical traders.