Currency Update - Wednesday 19th February 2020
AUD
Risk has come off slightly overnight as Apple warns that it
won’t meet its quarterly revenue target on account of the coronavirus in China.
The warning from the tech giant spooked traders as it is probably a sign of
what is to come from other companies that have exposure to China – which is a
very long list. The health crisis is causing major disruption to businesses in
the second-largest economy in the world, so traders are trimming their risk
positions. Safe havens are on the move higher with both gold and the USD in
positive territory. Both European and the US equities were in the red following
the commentary from Apple which is taking away much of the Aussie Dollar’s
short-term upside. It was a fairly light day of data but the Australian
Monetary Policy Meeting Minutes out yesterday morning helped the bears win out
following their comments that policymakers are ready to ease policy if needed.
While rates have remained on hold for now and there’s no expectation of an
immediate cut, it underlines that it remains very much an option to help
progress towards their inflation targets and to boost jobs. It also highlighted
the coronavirus as a new source of uncertainty for the global economy with the
full economic damage still very much unknown. Ahead today we have the Aussie
Wage Price Index in what should be another fairly subdued day of data.
USD
The Australian Dollar finds itself once again in the doldrums
trading just below 0.67 as risk comes off and appetite for the beleaguered
Antipodean disappears. The RBA’s dovish stance weighed heavily on the Aussie
and was pushed to a fresh weekly low of 0.6673, closing in the negative
territory for the fourth straight day. Amid the fears surrounding the
coronavirus that is helping the USD stay strong, there are several levels of
resistance for the Aussie Dollar to push through to find and attempt to stage
some kind of recovery above 0.67. On the data front, the upbeat performance of
the USD was assisted by a strong reading of 12.9 in the New York Empire State
Manufacturing Index, blasting past expectations of 5.1. Looking ahead we
nothing until early tomorrow morning when the US has its Building Permits, PPI
and the FOMC Meeting Minutes. It’s a big data release and presents further
downside risk to the Aussie Dollar if we see some strong readings.
EUR
The Euro has quickly found itself on the backfoot in the
overnight session with the Aussie Dollar clawing back losses to push back
towards the 0.62 handles. The Euro did well follow the dovish RBA comments that
saw the Aussie sold off for most of the day but the release of the German ZEW
Economic Sentiment saw the Aussie bulls win the evening. The reading slumped to
8.8 in February, well below the 21.5 expected and further highlights the
difficulties currently facing the largest economy in Europe. No other data to
report.
GBP
Pound Sterling found itself on the back foot against the Aussie
during the overnight session following a strong day of trade. However, the
losses weren’t fully recovered and we open lower this morning with markets
trading the pair at 0.5143 at the time of writing. On the data front Pound
wasn’t helped by a drop in their Average Earnings Index which dropped 2.9% down
from the 3.1% expected. Their unemployment rate held strong at 3.8% however
there was little reaction from markets. Looking ahead we have UK CPI in
addition to their PPI Input so expect some movement when they come out
overnight.
NZD
We open higher this morning against the Kiwi with markets
trading the pair at 1.0471 at the time of writing. Following a difficult day of
trading for the Aussie, the overnight session saw the Aussie with some bidders
that helped push us to one-week highs against the Kiwi. No other data to
report.