Currency Update - Tuesday 7th April 2020
AUD
AUD has rallied overnight, enjoying renewed confidence after
Covid-19 hotspots Italy and New York show signs that the pandemic may be
slowing. Other risk assets also performed well, US equities lifted with the
S&P500 gaining over 7% and the NASDAQ and Dow Jones making similarly
impressive advances. 10 year US yields rebounded 7 basis points however oil
took another 7% plunge as Saudi Arabia and Russia continue to be at
loggerheads. All eyes remain on coronavirus news and markets will be reacting
accordingly. We should expect that as Covid-19 hotspots slow down and new ones
emerge that markets will similarly lift and fall based off the news. The other
factor to consider is that the economic damage, due to the speed of the virus,
is simply lagging so far behind and won’t be truly understood for months to
come. Looking ahead we have the RBA cash rate decision later today which is
widely expected to keep rates on hold at 0.25%.
USD
AUD rallied to a high of 0.6106 in the overnight
session, opening slightly lower around 0.6086 at time of writing. The
rebound in risk didn’t manage to make a dent in the US Dollar Index which is
holding steady around 100. The pandemic continues its relentless spread through
the country though New York is showing signs that its hospitalisation rate and
death rate are slowing. Governor Cuomo warned that the state’s progress could
continue only if the lockdown guidelines continued to be followed. Little data
to report outside of Covid-19 news.
EUR
The lift in risk sentiment has helped AUD trade at 3-week highs
against EUR, trading at 0.5640 at time of writing. European stocks
followed a strong performance out of Asia, the major bourses up between 2%
- 4%.. Spain reported new corona virus cases at the lowest level since
March 22nd. Less positively French finance minister Le Maire said that his
country is heading for the worst recession since 1945 which undermined the EUR
and helped the AUD lift. Car sales for March illustrate the grim economic
picture with Italy showing a 85% decline, France down 72% while Spain fell 69%.
GBP
The news that UK PM Boris Johnson had been admitted into
intensive care sparked a sell off in the Pound which helped AUD lift close to
the 0.50 handle at time of writing. So far the news is sparse but optimistic
for Boris’ recovery however fears over the seriousness led markets to err on
the side of caution. The UK suffered a similar fate as continental Europe with
their own car sales down 44.4% YoY in March - the lowest fall in the history of
the series. UK construction PMI came in at 39.3 in March, a huge fall from 52.6
in February. No other data to report.
NZD
A relatively tight battle here continues, AUD worth 1.0260 NZD
at the moment. This morning the NZIER Business Confidence numbers printed at
-71 (-21 prior) which is the lowest level on record, worse than during the GFC.
With Australia and NZ taking different approaches to tackling the virus, the
comparative success of each approach from both a health and economic viewpoint
will eventually weigh into the AUDNZD and has potential to break the
recent stalemate.