Currency Update - Tuesday 10th March 2020

AUD

A wild Asian session yesterday saw AUD subject to wide ranges,
dipping around lunchtime against the majors (except NZD) to the tune of around
5% before recovering a good share of the losses before the local session closed.
The dip was blamed on a lack of liquidity, as well as growing fears of an
oil-based trade war between the Saudis and Russia in what is an already
risk-laden global environment. JPY was also on the march against USD, nearing
the critical 100 level leading to some contagion losses for AUD as traders
closed AUD positions in the bid for the Yen. Oil was down a whopping 25%, Iron
Ore down 4%, local stock markets were routed with the ASX down 7.3%, and the
VIX (aka the risk index) jumped 30%. Despite an absence of meaningful economic
data, volatility into the overnight session continued with AUD actually making
gains into the evening, before again paring gains to open this morning slightly
lower than yesterday’s opening levels against most majors. Never have market
orders been more effective with such wide trading ranges, orders on both sides
of the market were filled in the last 24hrs, speak with your account manager
about how to capture some of this volatility. NAB Business Confidence numbers
today are followed closely by Chinese CPI.

USD

AUD has traded a massive 3.7 cent (over 5%) range against USD
over the last 24hrs. It opens this morning at 0.6586 after trading as low as
0.6315 yesterday and as high as 0.6684 last night. US equity markets followed
the heavy Asian lead with the Dow, S&P and NASDAQ all down over 7%. Risk is
the main driver of the carnage across financial markets, the dual threats of
Covid-19 and the sharp fall in oil prices weighing heavy on risk assets. US
yields have also plummeted, with all three main treasuries (2yr, 10yr and 30yr)
all now offering less than 1% yield. There is already a further 1 full cent of
US Fed rate cuts priced in for next week’s meeting with US officials saying a
recession was more likely than not. The economic data continues to be thin (not
that we’re short of excitement at the moment) with nothing of note due from the
US until tomorrow night’s CPI data.

EUR

The rollercoaster ride has us opening lower at 0.5754 this
morning with a 6% range between the highs and lows of the last 24 hrs. Released
but largely ignored amidst the market turmoil, German trade data for January
was weaker than expected while Industrial Production beat expectations.
European equity markets following the Asian lead with early losses of around 7%
across the board with the Italian MIB down 10% after the Italian government had
announced a virtual lockdown of northern Italy earlier in the day to try and
stop the spread of the coronavirus. Only light data this evening from Europe,
confidence based developments will continue to be the flavour of the week.

GBP

AUD opening only slightly lower than yesterday at 0.5030 but was
still subjected to massive volatility, having dipped as low as 0.4820 yesterday
around lunchtime. The reasons behind the moves were nothing do with anything
from the UK, the three sections above outline the main drivers of the increase
in volatility. UK equities were not immune to the risk-based rout, the FTSE
down almost 8% overnight. No data of note due from the UK until tomorrow night’s
Annual Budget Release.

NZD

AUD opens lower at 1.0384 this morning, however this cross was
much more stable than AUD vs the other majors over the last 24hrs. The close
links between AUD and NZD evident as both currencies traded in unison through
the dip and recovery. RBNZ Gov Orr is due to speak at 12pm today and with
markets desperate for reassurance from central bankers around the world, the
pressure will be on to deliver.