Currency Update - Tuesday 31st March 2020

AUD

Market confidence remains cautiously high with US equities
continuing to lift after a relatively calm 24 hours of trade in for the AUD.
Oil collapsed once more with a drop of 6.3% and we saw the US Dollar Index lift
with a 0.6% gain after suffering losses for the last five consecutive days. The
EUR and European stocks continue to be heavily sold which helped the DXY lift.
Confidence in Australia also remains high with the ASX lifting 7% after the
Government announced a massive stimulus injection to subsidise pandemic
impacted employees. Ahead today we have Chinese Manufacturing PMI out at 12pm
which is expected to show improvements from the historically low previous
reading reflecting market belief that China is coming out the other side of the
pandemic. The AUD has had a relatively lethargic Monday, however the big data
points are due thick and fast for the remainder of the week so expect
volatility to resume in turn.

USD

AUDUSD has traded fairly flat over the past 24 hours without
much in the way of movement with markets trading the pair at 0.6166 at time of
writing. US yields remain flat with 10 year treasury yields down 6 basis points
down to 0.66, reflecting fears that the pandemic will continue for months to
come. On the data front, US Pending Home Sales for February rose by 2.4% MoM
and 11.5% YoY, beating expectations of -1.7% and +6.5% respectively. With the
numbers coming prior to the coronavirus pandemic they were largely ignored.
More telling was the Dallas Fed Manufacturing Activity Index for March
which fell to a record low of -70.0, down from +1.2 and below expectations of
-10.0. A subdued 24 hours of trading and with no major data until noon (Chinese
Manufacturing PMI) we should expect markets to trade fairly flat in the lead
up.

EUR

The AUD continues to trade fairly flat against the EUR, failing
to capture the 0.56 handle and trading at 0.5581 at time of writing. There is
little market confidence in Europe as there is a perceived lack of clear
response from Brussels around the pandemic holding back European stocks and
keeping EUR heavily sold. There is talk of ‘corona bonds’ being issued to
help combat the crisis, but the old divisions in the Eurozone have re-emerged,
where southern members like Italy and Spain are in favour, while Austria and
The Netherlands are opposed to the plan. Stocks are well off the lows of this
month, so sentiment has stopped falling through the floor, but with the health
emergency still raging, the bulls might remain cautious.

GBP

The AUD had an up and down 24 hours with the pair being traded
down to 0.4921 before hitting a reversal with markets trading the pair up to
0.4980 at time of writing. Pound remained firm throughout Monday however ran
into trouble with fears inflamed over Brexit and the pandemic weighing on the
GBP in the early morning. Little else in the way of news out of the UK.

NZD

The AUD continues to lift against the Kiwi with markets trading
the pair at 1.0245 at time of writing. So far markets are looking at the
Australian stimulus packages favourably and helping the heavily sold AUD
recover some recent losses. Ahead today we have the NZ Business Confidence
survey which should be at all time lows however the question remains whether
markets will pay attention to confidence surveys that historically have
impacted currency markets.