Currency Update - Thursday 13th February 2020

AUD

Risk sentiment continues to lift as the countermeasures taken by
global governments appears to have the coronavirus on the backfoot. Markets
have renewed optimism, spurred by a declining infection rate in Hubei province.
Other risk assets such as global equities are also trading higher with the
S&P and NASDAQ both lifting 0.5% and 0.8% respectively. It was a quiet day
yesterday in terms of Australian data but later this morning we have RBA
Governor Lowe speaking at an Economic Leadership Forum in Melbourne. Markets
will be looking for some insight into the next monetary decision early next
month.

USD

The Australia Dollar enjoyed a lift in sentiment yesterday with
markets making modest gains over the course of the day. We came off the highs
after a fairly subdued overnight session and markets trade the pair this
morning at 0.6737. Fed Chair Powell failed to make much of an impact
on markets with a reiteration of his confidence in the US economy. Powell
argued for the long-term sustainability of the US economy and how there’s ‘no
reason’ rising wages and job gains cannot continue into the future. We have a
fairly quiet day in store for us with the latest Coronavirus infection numbers
again likely to provide the catalyst for any market moves. Given that the number
of new confirmed cases has fallen to the lowest level since the crisis began,
there is an optimism in the markets that should help support the Aussie Dollar.
If we see the Aussie Dollar drift higher in what should be a fairly quiet day
of trading keep in mind, we have US inflation data during the overnight
session. Given that core inflation has shown reduced momentum lately and in
December we saw the softest reading in 10 months we could be in store for a
bounce back that may erase any soft gains made today.

EUR

Euro finds itself once again under fire as the Australian Dollar
adds to a recent string of gains. Markets are trading the pair just under the
0.62 handle which is close to three-week highs. European equities fared better
under the improved risk conditions but in the absence of news and generally
more positive economic outlook, the AUD continues to gather strength. Poor
industrial production figures are weighing on the Euro with the EZ measure
showing a 2.1% decline in December. This was far below the 1.6% decline that
was widely expected and while the reading itself is usually not very
influential, the lack of other news gave it a bit more weight. Looking ahead we
have some moderate impact data coming out this evening in the form of the EU
Economic Forecasts.

GBP

We open higher against the Pound this morning with the Aussie
attempting to break through resistance around the 0.52 level. With the details
still unclear of exactly how hard the upcoming Brexit will be, there is
certainly room for the Aussie Dollar to make a more extensive recovery. We had
a quiet day with little news out of the UK yesterday and today is no different
so expect a subdued session that is largely traded off of sentiment.

NZD

The Australian Dollar took a nose dive against NZD yesterday
following the RBNZ’s monetary decision and accompanying statement. Markets are
trading the pair at 1.0421 at time of writing after we spent most of the last
day consolidating following the drop. Rates were left on hold at 1% as expected
but the RBNZ were a touch more hawkish than anticipated, transition from an
easing bias to a neutral bias. A quiet day in front of us with no other news.