Currency Update - Tuesday 14th April 2020

AUD

AUD continues to rally from renewed confidence that the worst of
the outbreak is now behind us, assisted by a lift in commodity prices and a
generally weaker USD. Oil prices had a volatile start to the week and traded in
an 11% range but ultimately finished 0.5% lower despite the positive news that
OPEC+ had agreed to cut production by 10 million barrels per day. The US Dollar
Index was trading a shade lower despite the slight turn against risk and
currency markets are still suffering from liquidity issues, increasing
volatility across the board. Speaking more broadly, last week we saw a
continuation of market optimism that has helped the AUD lift as high as 16% off
the lows experienced 2 weeks ago. Markets continue to find confidence in
stimulus as well as in stabilising numbers in epicentres such as New York and
Italy. Adding to the positivity is how well Australia has so far fared against
the pandemic, with the virus almost entirely contained with fewer than 50 new
cases springing up in the last 24 hours. Ahead today we have tentatively
scheduled Chinese data that will hopefully reveal their trade balance in
addition to the NAB Business Confidence survey covering Australian businesses.
Expectations are low for the survey so we shouldn’t see much of a reaction in
the likely event it comes out extremely poor.

USD

AUDUSD continues to broadly trade higher with last week seeing
the AUD lift close to 4 cents. We’ve only just off the highs, trading just
below 0.64 at time of writing. The numbers in the US still indicate that they
are far from the light at the end of the tunnel however markets are responding
positively to the slight reduction in the death rate seen in New York. Perhaps
more relevant to currency markets at this stage is when lockdown measures will
be eased back however with France extending its lockdown to May, the UK
signalling no change and the US still right in the middle of their crisis we
should not expect to see much change this month. Australia may be a different
story with the NSW Premier Gladys Berejiklian speaking that some restrictions
may be lifted as early as May. The next stage of this crisis will be dealing
with the economic damage wrought by the lockdowns and for now we’re still
flying blind without much insight beyond worrying employment figures. Tomorrow
we’ll have some big ticket items in the form of US Retail Sales which are
forecasted at  -8%.

EUR

The EUR continues to give up ground to the AUD which is trading
at 0.5856 at time of writing. The impressive recovery from the 0.56 lows 2
weeks ago highlight the volatility we’re seeing in currency markets. As
quickly as we came up, we can easily come back down again so while importers
are relieved to see the recovery, we shouldn’t become married to the idea that
currency markets are returning to normalcy too quickly. No EUR data to report
so expect AUDEUR to trade around risk sentiment and coronavirus news before the
local Unemployment data on Thursday.

GBP

AUD continues to improve against the Pound and we open this
morning above 0.51 for the second time in a week. The UK continues to grapple
with the pandemic, suffering another 737 deaths in the past 24 hours which is
weighing on the Pound relative to the heavily bid AUD. Boris has recovered and
presented a negative test for Covid-19. No other data to report. Local
Unemployment (Thursday) and Chinese GDP at the end of the week will be the
highlights of the economic calendar this week.

NZD

The AUD is levelling out after an impressive run against the
Kiwi is the past 2 weeks. Markets are trading the pair just below 1.05 at time
of writing after running into resistance near the big number. The AUD is
storming back after the recent sell off 2 weeks ago and with low liquidity
these types of moves will continue to be dramatic both in buy up and sell off
scenarios. No other data to report.