Currency Update - Tuesday 4th February 2020
AUD
After a horror day for Chinese equities yesterday, markets found
some calm overnight with a rebound in US equities thanks to the prospect of
stimulus from the Chinese government. Coming back from the Lunar New Year break
Chinese equities yesterday were ravaged on the open market with an 8% drop in
total by market close. US equities did better in the overnight session though
the renewed optimism failed to help the Australian Dollar in any material way
with the Aussie continuing to fall or at best trading sideways against the
majors. On the data front Australian Building Approvals came in strong with a
-0.2% reading against the -5% expected though little reaction by markets. Ahead
today we have the RBA monetary decision which is largely expected to be a non-event
with only a 26% chance of a rate cut.
USD
The Australian Dollar is hanging on by a thread against the USD
with markets trading the pair just below 0.67 at time of writing. With some
strong ISM Manufacturing data released overnight lending strength to the USD
and with more and more cases of the coronavirus around the world, investors are
cautious and putting their money behind the safe havens. US ISM Manufacturing
for January rose to a 6 month high of 50.9, up from a positively revised 47.89
and beating expectations of 48.5 with gains seen across key sub-indices such as
New Orders, Prices Paid and Employment. Also released overnight, December
Construction Spending fell by 0.2% comparted to forecasts of a 0.5% increase.
The US CDC also confirmed 11 cases of coronavirus with a second
confirmed case of human to human transmission in the US which helped further
weaken AUD/USD. No major US data for rest of today.
EUR
AUD/EUR continues to trade sideways with both currencies under
heavy selling pressure against the majors amidst the
developing coronavirus outbreak. Markets are trading the pair at 0.6050 at
time of writing with limited movement since yesterday morning. Overnight we had
a slew of European PMI data with Spain kicking things off at 48.5 (48.7 expected)
with Italy at 48.9 (47.3 forecast). France and Germany printed at 51.1 and 45.3
respectively, with both readings 0.1 above what was recorded in the preliminary
results. The EZ measure came in at 47.9 vs the flash of 47.8. AUD/EUR failed to
move much off the release and with a light data calendar for the next 24 hours
we can expect more of the same.
GBP
Pound Sterling has found itself under fire with the Aussie
Dollar lifting from the lows yesterday of around 0.5070 to over a percent
higher with the pair now traded at 0.5150. The Pound found itself in its
biggest slump in seven weeks as fears over trade conflict between the UK and
the EU concerned investors over just how hard this Brexit is going to be. EU
chief negotiator Michel Barnier said in Brussels that a “highly ambitious”
trade deal is on offer for the U.K. -- but only if London agrees to its rules.
Speaking minutes later, Prime Minister Boris Johnson rejected the demand and
insisted Britain will thrive even if negotiations fail. The UK manufacturing
PMI came in at 50.0, beating the forecast of 49.8 though this offered little to
stop Pound Sterling behind heavily sold off. No other major UK data to report
over the next 24 hours.
NZD
Amid heavy sells off risk as we suffer through the coronavirus,
AUD/NZD has remained fairly subdued. The Australian Dollar came up off of
yesterday’s lows of 1.0323 but soon found itself dropping from the high to
trade at 1.0355 at time of writing. The RBA decision is the big focus for today
though tomorrow morning we have NZD Employment data so we may see a breakout of
current levels soon.