Currency Update - Tuesday 28th January 2020

AUD

Risk assets and FX linked to Asia (AUD included) are suffering
as Global risk sentiment continued to worsen overnight after fears grew that
measures taken by the Chinese to stem the spread of the Coronavirus was
failing. Infections were on the rise around the globe with fatalities
having grown to 80 at the last report while there were more than 2700
infections reported. Initially, last week, the market found comfort in the
relatively low ‘death rate’ for the new coronavirus - maybe at just 2.5% vs.
10% for SARS – overnight though the market started grappling with the spread
rather than the mortality rate. To the economic data for the week ahead and
tomorrow’s local CPI numbers will be the focus, the result will contribute to
the RBA’s interest rate decision next Tuesday with markets currently pricing a
25% chance of an interest rate cut. No data to speak of today and with China
enjoying its New Year holiday it should be a pretty restrained local session.

USD

Overnight AUD fell straight through support at 0.68 to test the
late-November lows at 0.6760 where it sits this morning. Risk appetite has
drained from markets with the developing emergence of Coronavirus from China,
USD also the beneficiary of speculative flight-to-safety trading, completing a
double-whammy for AUDUSD. To the data and there’s plenty to speak of, including
the Fed’s interest rate decision tomorrow night where interest rates are
expected to remain unchanged at 1.75%. Tonight we’ll get underway with Consumer
Confidence numbers.

EUR

AUD on the back foot here testing support at 0.6130 this
morning. Again, the risk-off mood is to blame for the slide rather than any
data-related forces. Last night the German Ifo Business Climate survey
disappointed with a score of 95.9 (97.1 expected) which put a halt to recent
positive momentum that seemed to be building over the last three months.
Tonight we’ll get Spain’s Unemployment Rate which currently sits at a whopping
13.9%, an increase to 14% is expected.

GBP

AUD under fire here as well, sitting at 0.5176 this morning
which is just half a cent above 3 ½ year lows. The Bank of England is in action
on Thursday evening, rates expected to remain unchanged at 0.75% however the
vote is expected to be closer than last time, the number of votes in favour of
a rate cut are expected to increase. No other data of impact from the UK for
the week.

NZD

AUD is trading at 1.0327 this morning, losing the trans-Tasman
battle to the tune of over 5 cents since early November. Friday’s Kiwi CPI
print of 0.5% which was better than expectations added to the weight on the
AUD. NZ Trade Balance data is due on Thursday however it is unlikely to result
in any dramatic moves in currency.

FX CorpFX Corp Pty Ltd