Currency Update - Tuesday 18th February 2020

AUD

An extremely quiet 24 hours in currency markets with the US on
holiday and a baron economic calendar. The Covid-19 situation continues to
temper following a further reduction in the new infections cases and a renewed
pledge of support from China. The economic impact of the crisis will start to
become clear in coming weeks; yesterday Cathay Pacific flagged ‘significantly’
lower results in Q1 and one would expect the travel and hospitality industries
to feel the pinch at some point. Local data today is limited to the RBA’s
Monetary Policy Meeting Minutes which will carry lower-than-usual importance
given we have heard from Governor Lowe twice since the early-February Board
meeting and also received the quarterly Statement on Monetary Policy. Given the
Governor’s more positive narrative, however, since the holiday break, we will
be looking for signs of underlying doubts in that shift in tone.

USD

AUDUSD traded a 23 pip range over the last 24hrs between 0.6733
and 0.6710, opening at 0.6713 this morning. The US is enjoying its President’s
Day Holiday so economic data is thin on the ground. The week ahead will remain
comparatively quiet on the data front from the US, the local Employment data on
Thursday carries with it the most market-moving-potential for the week. Given
the tight trading ranges all technical levels remain intact, support sits at
0.6700 and resistance will start to pile up before 0.6800.

EUR

AUD trading tightly here as well, opening this morning just shy
of the 0.62 handle having traded a 16 pip range so far this week. European
equities traded a little firmer yesterday, the improving Covid-19 story
offering encouragement to traders. Tonight we’ll get the German ZEW Economic
Sentiment numbers which have seen considerable recent improvement beating expectations
on the last for iterations and last month showing 4 ½ year highs.

GBP

Weakness in GBPUSD has allowed AUD to benefit also, creeping
slowly higher to current levels at 0.5162. The data from the UK opens tonight
with Average Earnings Index (their equivalent of our Wage Price Index).
Wed/Thu/Fri will be a massive three days of data from the UK over which time
we’ll get CPI, Retail Sales and Manufacturing PMIs respectively. As far as
currency-moving data goes, that’s a pretty strong trifecta so watch for
volatility in the second half of the week.

NZD

Swings and roundabouts here – AUD spent yesterday making gains
to a high of 1.0466 before giving it all up overnight, opening today where we
started yesterday at 1.0428. No data from NZ to influence movements at the
moment, tomorrow morning Fonterra will release the results of its fortnightly
milk auction with prices coming off a 4.7% decline at last measure.