Currency Update - Monday 9th March 2020

AUD

Risk continues to erode in the face of a mounting
coronavirus outbreak that the WHO has now declared as a pandemic. This
reclassification reasserts the seriousness of the outbreak though the WHO does
claim that there is still time to contain the virus. Global equities were
closing in the red as investors trim risk positions which put the AUD back
under pressure despite last week’s strong showing. Oil suffered its worst day
in 5 years as it fell 10% with further falls expected after it was announced
that Saudi Arabia intended to boost production to above 10 million barrels per
day. The AUD stumbled slightly Friday morning after another shocking Retail
Sales reading, missing expectation of 0.0% growth to contract -0.3%. We have a
quieter start to the week this week so expect sentiment to dictate the
direction of trade.

USD

The AUD has managed to hold on after an up and down end of the week with markets
trading the pair around 0.6618 at time of writing – not far off where we were
on Friday morning. The USD is finding some weakness as Covid-19 spreads in the
US so if we do see a more serious outbreak in the US we should expect to see
USD weakness. On the data front the USD added 273k jobs in January, easily
beating the forecast of 175k. The unemployment rate dropped to 3.5% with
average hourly earnings increasing by 0.3% during the month which matched the
expectation. North of the border Canada added 30.3k jobs (11.0k expected) with
an increase in the participation rate meaning the unemployment rate ticked
higher to 5.5%. Between this and a poor Retail Sales result it was enough to
take the wind out of the sales of an AUD that had spent much of last week
gathering momentum. The strong employment data was unable to help the share
market however with US equities ending the day 3% down. No other data to
report.

EUR

We open lower this morning against
the Euro after a respectable Friday showing with markets trading the pair
around 0.5814 at time of writing. With USD weakness abounding the Euro has
surprisingly found more bids as investors look at alternative currencies to get
behind. We have a light calendar for data so keep an eye out for news that the
virus is starting to take hold outside of Italy as a source for Euro weakness.

GBP

Pound Sterling continues to beat out the AUD as we approach the 0.50 handle. Markets
trade the pair around 0.5050 at time of writing so we still have a full percent
to go but with the latest string of losses we may be there sooner rather than
later. Brexit still looms like a spectra and if we do see any Brexit updates
there is always downside GBP risk to consider that could benefit Australian
importers.

NZD

The AUD is turning the ship around on the Kiwi with the AUD stemming recent
losses to move up slightly higher. Markets are trading the pair at 1.0447 at
time of writing though with Governor Orr speaking tomorrow at noon we should
expect a more subdued session today in the absence of other data.