Currency Update - Wednesday 26th February 2020
AUD
AUD had mixed results overnight, steadying against the USD and
NZD but slipping against the other majors. Markets continue to be dominated by
the evolving virus outbreak, markets now seeing the epidemic as a global issue
rather than just a China issue however a Pandemic is still yet to be officially
declared. Equities losses across the globe are continuing as flight to safety
builds, the local ASX200 down another 1.6% yesterday. Commodity prices are also
under the pump with oil down another 3% taking the total drop from 2020’s highs
to 21%. Economic data continues to take a back seat, nonetheless we have
Construction Work Done for Q4 last year due this morning but tomorrow’s Private
Capex data remains the best chance (still a low chance) for data-related moves
for the remainder of the week.
USD
AUD has steadied against USD in the face of overwhelming risk
aversion and downside momentum. Having re-tested 11 year lows at 0.6585
overnight, it bounced to open at 0.6600 this morning. Warnings were issued in
the US from the Centre of Disease Control and Prevention to prepare for an
outbreak of Coronavirus on US soil. US yields fell overnight and Wall Street
was heavily in the red, most bourses posting losses to the tune of 3%. The
S&P 500 has lost over 5% in the first two session this week alone. The AUD
also received an assist overnight with worse than expected US Consumer
Confidence numbers printing at 130.7 (132.6 expected). Only mid-tier data is
due to trickle through for the remainder of the week. Virus related headlines
will dominate currency markets with a potential declaration of a pandemic the
immediate risk to AUD.
EUR
AUD continues lower at 0.6065 against EUR despite news of rapid
expansion of Coronavirus across Europe; more deaths in Italy and the first
cases confirmed in Switzerland, Spain and Croatia. European stocks suffered
accordingly with the major bourses down around 2%. The data was more
encouraging with German Final GDP confirming the preliminary figure of 0.0%
(better than a contraction!) and French Manufacturing Confidence surprisingly
improving in February. No data from The Zone tonight so virus movements will be
the focus again.
GBP
AUD is now only 15 pips above 3 ½ year lows, opening at 0.5075
this morning as risk aversion continues to plague the AUD. With no virus cases
confirmed in the UK so far and after last week’s run of strong data the GBP
deserves its gains. No data of note due for release tonight.
NZD
A fair fight here see sideways trading and AUD opening at a
familiar 1.0440 this morning. AUD hasn’t been able to capitalise in the
aftermath of Monday’s weak Kiwi Retail Sales numbers, the next opportunity will
come with tomorrow morning’s ANZ Business Confidence numbers from across the
ditch. Against USD, NZD has suffered in turn with its Aussie cousin and sits
only 16 pips above the recent lows.