Currency Update - Thursday 2nd April 2020

AUD

The AUD is hitting some turbulence as markets are digesting some
of the latest forecasts for the pandemic in the US that shows no signs of
slowing down. The US is currently projected to be one of the hardest hit
countries in the world with a six figure death toll becoming more likely every
day. Markets have been happy to ride the wave in confidence that they are
supported by central banks around the world however the honeymoon appears to be
ending with risk assets running into selling pressure. US equities dropped by
4.4% across the board and the US Dollar Index rallied 0.7%. The rally in the
dollar appears to be driven at least in part by a fall in the Euro but it
appears that the USD is remaining the safe haven of choice despite the grim
reality of the pandemic in their country. We did see the AUD have a significant
spike up overnight however this was brief and most likely the result of an
algorithmic error or fat finger and nothing to waste too much time thinking
about. Tomorrow morning we have another big ticket data release in the latest
US Unemployment Claims which is so far being forecasted at a staggering 3.5m
(up from previous month of 3.2m).

USD

With pessimism returning, the AUD is finding itself being
quickly sold off with markets trading the pair at 0.6075 at time of writing. We
briefly traded to a high of 0.6185 however this lasted only a moment before the
short sellers made quick work of the higher levels. The big data news was
the US ADP Employment for March which came out last night. The reading
showed 27k jobs lost, down from +179k, though much better than expectations of
-150k. Tempering the beat were suggestions the data was perhaps a little
optimistic as it was taken prior to the lockdown in NY and may not include
furloughed workers. This lag in data release means financial markets need to
fly largely blind until there’s actual data to support positions and in times
of great crisis we can expect emotion and fear to dominate. The concern now is
that as the pandemic escalates we could see another round of panic selling take
hold of the market.

EUR

The AUD is in selling territory and the EUR is gaining ground
with AUDEUR being traded at 0.5543 at time of writing. The AUD hit a big spike
against the majors overnight and we hit 0.5663 against the EUR however this was
quickly reversed. Luckily for EUR importers, the Eurozone is also under a lot
of pressure so with ample EUR weakness the losses so far have been minimal.
Bleak manufacturing PMI numbers for March was enough to encourage EUR sellers
with Spain kicking things off at 45.7 with Italy at 40.3. France recorded 43.2
and Germany 45.4 with the EZ reading of 44.5 the lowest since 2012. No other
data to report.

GBP

AUD/GBP is holding onto to the 0.49 handle since it ran into
selling pressure around 4pm yesterday eastern time. Risk is being shed and the
AUD’s recent run of strength means it’s a prime target for sellers. UK
manufacturing came in at 47.8 vs the forecast of 47.0 which while something of
a good outcome, still represents the lowest levels 2012. This massive hit to
manufacturing will have flow on effects in both the UK Labour market as well as
in supply chains. No other data to report.

NZD

The AUD is holding on against the NZD after the NZD took its
fair share of heavy selling overnight and markets are trading the pair at
1.0262 at time of writing. We’re opening slightly lower than yesterday however
the damage compared to other currencies is fairly minimal. The antipodeans are
both risk on currencies so as markets shed risk both are in line to fall if the
pessimism continues.