Currency Update - Wednesday 11th March 2020
AUD
Risk sentiment has lifted overnight after President Trump
announced a stimulus package to deal with the coronavirus outbreak and the
economic fallout currently impacting the US economy. While thin on details, the
rumours are that the stimulus package will include cuts to payroll tax, paid
sick leave and direct packages to affected industries. We saw an immediate lift
to equities in light of the news with both the ASX200 up 3% in addition to US
equities such as the S&P lift 4.3%. The reaction from the AUD has been
fairly muted however it does improve the overall conditions for risk assets
such as the AUD. On the other side of the pond Europe is still struggling with
Italy announcing that they are planning their own fiscal stimulus package to
deal with the outbreak. The news is still fairly poor with Italy being hit with
another spike of confirmed cases however monetary and fiscal reactions are the
kind of news to improve market conditions. On the data front the CPI
reading out of China coming dead on expectation at 5.2%. Ahead today it’s
another light day as far as Australian data is concerned with the only news
coming from an update later this morning from RBA Deputy Governor Debelle.
USD
Despite the improved market conditions for the AUD, the stimulus
announcement from Trump is acting to lift the USD with the US Dollar Index
rising 1.71% in the last 24 hours. The AUD continues to slide off the highs
achieved in the very early hours of yesterday morning with markets trading the
pair just below the 0.65 handle. It is a bleak picture for importers who may
have been counting on the USD to deflate off the back of their own coronavirus
outbreak and dovish monetary policy however so far the USD is holding
strong. Yesterday morning when the stimulus was announced President Trump
noted the desire to protect the airline and shipping industries and said that
the virus will go away and telling the US to “just stay calm”. Payroll tax cuts
were considered at the meeting with reports suggesting that the scope of the
stimulus could be $300 bio. Looking ahead we have a good mix of high impact US
data with US CPI as well as an update from Treasury Secretary Mnuchin out this
evening.
EUR
The AUD continues to trade sideways against the EUR with the AUD
continuing to creep marginally lower with markets trading the pair at 0.5742 at
time of writing. Market conditions are poor for both currencies however the
move by Italy to put the entire country in quarantine has been viewed
favourably by traders. It was a quieter day in terms of data with French as
well as Italian industrial production reports showing a 1.2% and 3.7% growth
respectively. No other data to report.
GBP
The AUD has crept higher against the Pound in the absence
of much news or data outside of vague Brexit fears leaving few investors
interested in the GBP. The latest news out of the UK is about stimulus which is
quickly becoming the norm for every government around the world. So far nothing
is set in stone however the rumour mill is buzzing ahead of the annual UK
budget release this evening. In other news the UK will be releasing their GDP
figures in addition to their manufacturing production numbers tonight as well.
No other news to report.
NZD
The AUD continues to slip lower against the NZD showing marginal
losses in the overnight session. There was some added strength to the Kiwi
following RBNZ Governor Orr advising yesterday in a press conference that he
does not need to use alternative monetary policy instruments. This helped
reassure markets and find more bids for the NZD. No other data to report.