Currency Update - Tuesday 25th February 2020
AUD
Financial markets are once again being hit by mounting fears
over the coronavirus as the World Health Organisation declares that the world
must prepare for a pandemic. While inside of China the infection rate is
dropping, the virus is now accelerating overseas with 7 confirmed deaths in
Italy and more cases appearing in the Middle-East. Local shares got slammed
yesterday dropping over 2% and now trading back below the 7000 mark. The CBOE
Volatility Index or VIX has jumped 48% and US equity markets saw nearly all of
2020’s gains wiped out with the S&P500 and Dow Jones both falling 3.1%
while the NASDAQ saw a 3.4% loss. Oil was also hit hard and down 3.6% in late
overnight trade while US yields also tumbled with the 2 and 10-year spaces
falling 10 basis points. In light of investor fears of the economic
consequences, safe havens are on the rise with gold spot prices rising to
seven-year highs. No data out yesterday and we have a light day ahead so expect
trade to be dominated by news of the developing international coronavirus
situation.
USD
Despite the turn for the worse in the ongoing outbreak, the
Australian Dollar has managed to doggedly hold onto the 0.66 handle,
benefitting from a fall in the US Dollar Index. Trade has started moving
sideways since we hit 0.66 with the AUD navigating a few potentially disastrous
set backs to maintain its footing somewhere close to previous lows. In early US
data the Chicago Fed manufacturing activity index for January came in at -0.25
vs the forecast of -0.18. Dallas Fed manufacturing printed at 1.2 in February
vs the forecast of flat. Early tomorrow morning we have CB Consumer Confidence
penned for release which is coming off of a strong January reading. No other
data to report.
EUR
The Australian Dollar opens slightly lower against the Euro this
morning despite a tight trading range as positive Eurozone data helps edge out
the AUD. Despite the coronavirus crisis unravelling both currencies' relative
positions, the IFO German Business Confidence Index beat expectations in
February coming in at 96.1. vs expectations of 95.3. The IFO is also sticking
to its first quarter growth forecast at 0.2% suggesting that the German economy
appears unaffected by developments surrounding the coronavirus so far. Whether
this is an accurate description remains to be seen but for now it’s acting to
shore up the EUR against an AUD recovery. The Eurostoxx 50 also suffered a
calamitous day dropping 4% by the end of the session. No other data to report.
GBP
Pound Sterling lost a step over the past 24 hours with the
Australian Dollar opening slightly higher this morning. Trade was relatively
subdued in the absence of economic data but over the course of yesterday’s
trade the AUD managed to move back up to a high of 0.5120. The overnight
session was less kind to the AUD with markets trading the pair back down to
just above the 0.51 handle. Bank of England Chief Economist Haldane offered
some commentary that he does not see overstretched balance sheets nor asset
bubbles in the broader global economy however there was little reaction from
currency markets. No other data to report.
NZD
The Kiwi Dollar has bested the AUD in what was a difficult
overnight session for the under fire antipodean. AUD lost 0.5% from highs of
1.0460 down to 1.041. The move somewhat perplexing given the NZD had some less
than impressive data out earlier in the day with a miss on Retail Sales helping
lift the AUD throughout yesterday’s trade. Once the American session began
however the Aussie was steadily sold against the Kiwi back to down to current
levels above 1.041. No other data to report.