Currency Update - Friday 27th March 2020

AUD

The AUD has stemmed yesterday’s losses, performing well
particularly against USD overnight. Risk sentiment remains positive with the
$2tr USD stimulus approved by congress and even through a historically horrific
jobless claims number out of the US. To add some context to the numbers,
jobless claims on the 12th of March were 220k (which is roughly average) and
the jobless claims on the 19th of March jumped up to 280k (signaling the first
glimpse of what the coronavirus is doing). With most of the US in lockdown,
many economists expected a concerning jump to 1.6m new jobless claims. The
actual number was 3.3m, one of the worst readings of all time. Equities
remained largely untouched and even closed the day higher despite the fact that
a large part of the US economy just went up in flames. The AUD continues to
trade on sentiment and with numbers like that coming out there is a growing
question of how long the recent stimulus and rescue packages will prop up
investor confidence.

USD

With the US economy reeling from the jobless claims the US
Dollar Index immediately came under selling pressure which helped the AUD
recover previous lost gains to trade 0.6045 at time of writing.  Fed
Chair Powell spoke early in the NY morning, stating the Fed was looking to
support the flow of credit in the economy and that they would not run out of
ammunition. This kind of commentary is exactly what is helping investors
continue to trade with some degree of confidence despite the economic bloodbath
playing out around the world. The suggestion here is that the Fed is willing
and perhaps required to continue to assist the ailing US economy throughout the
duration of the crisis and perhaps beyond. In other Covid-19 news The G20
concluded a virtual summit announcing that they had agreed to do “whatever it
takes” to minimise the social, economic and health effects of the pandemic.
Manufacturing of medical supplies was to be boosted with the WHO set to assess
gaps in pandemic preparedness. Looking ahead there is a growing concern over next
week’s US unemployment numbers which many pundits are anticipating to
dwarf last night’s measure.

EUR

The AUD also managed gains against the EUR, recovering roughly
half of the sell off from early Thursday evening. Markets are trading the pair
around 0.5477 with the AUD encountering some offer interest up to the 0.55
handle that flattened trade. European equities closed the day weaker
and the ECB Economic Bulletin failed to offer up anything new. Loan and
money supply growth was actually better than predicted as the Eurozone headed
into the coronavirus chaos in March however the news is of little interest to
anyone. The staggering death toll in Italy continues to add up however
yesterday’s figures of 662 deaths do mark a drop which perhaps is a signal that
the pandemic in Italy is peaking. If indeed Italy is towards the end of the
cycle then we can anticipate a positive reaction in terms of risk sentiment.

GBP

The AUD is once again on the back foot against the Pound with
markets trading the pair at 0.4968 at time of writing. The AUD ran into trouble
shortly after regaining the 0.50 handle in the early hours of trade and was
quickly sold back down, the GBP was taking full advantage of a weaker USD which
was flowing into AUDGBP as well. Little else of news with The Bank of
England keeping monetary policy unchanged as widely expected after recent
emergency measures though they did vow to expand asset purchases further if
required.

NZD

The AUD continues to trade blows with the NZD however after a
short but strong rally from the AUD the Kiwi dollar quickly returned fire in
the early hours as the US jobless claims number was absorbed. AUD/NZD is now
being traded around 1.0162 at time of writing and with little data out to close
the week we can expect the back and forth to continue on sentiment.