Currency Update - Wednesday 1st April 2020
AUD
Risk sentiment is showing signs of weakening with US equities
taking a turn for the worse and the AUD running into selling pressure since
yesterday's temporary peak above 0.62. Low liquidity continues to plague
currency markets, making for choppy waters, best evidenced by a flash crash we
saw just before noon yesterday. End of quarter currency flows saw the US Dollar
Index lift marginally by 0.8% before paring gains to finish relatively
unchanged. The latest economic data from China paints a picture of a massive
rebound in business activity in March. The manufacturing PMI and the
non-manufacturing PMI readings were 52 and 52.3 respectively. Those figures are
in stark contrast to the dreadful readings of 35.7 and 29.6 registered in
February. If the figures are to be believed then it would appear that Beijing’s
tough response to the Covid-19 crisis has paid off. While historically a good
indicator it seems the data has failed to make much of an impact on the AUD
which opens lower against the majors this morning after a tough overnight
session of selling. Ahead today we have big US data in the form of non-farm
employment which if last week’s jobless claims is anything to go by, should be
nothing short of horrific. The previous reading showed an uptick in new jobs to
the tune of 183k but the forecast today is -150k. It’s out this evening in time
for us to review tomorrow morning but expect some volatility overnight.
USD
The AUD spent the first half of yesterday slowly creeping higher
against the USD however by late afternoon the sellers arrived and this morning
markets are trading AUDUSD at 0.6157. There is significant offering interest
above 0.62 and some minor support forming around the 0.61 handle. It’s a low
liquidity market however so volatility should be considered the norm and we’ve
seen what this volatility has done to previous support levels. Non-farm
employment this evening is the key data to watch and with a relatively quiet
calendar in the lead up we may see a more stable market in the lead up. The
question remains that if the abysmal US data keeps piling up whether that would
trigger another panic in the market. The support shown by the US Fed and around
the world have certainly acted to restore confidence after the initial shock
however the situation in the US is grim with no national lockdown and while the
majority of Americans are under some form of lockdown, many states remain
open.
EUR
AUD is lower this morning after yesterday afternoon's sell off,
markets trading the pair at 0.5562 at time of writing. European equities
opened strongly following the stronger than anticipated Chinese PMI numbers
that came out during the Asian session. The majority of Asian stock markets
finished the day higher although the ASX lost 2%. Coronavirus deaths in Spain
increased by 849 between Monday and Tuesday which was a new high with Italy
seeing 812 deaths. The selloff continued in equities with the Eurostoxx index
flat after posting 2% type gains in early trade. No other European news
scheduled for release today with all eyes on the big ticket US data this
evening.
GBP
The Pound is stronger this morning, opening at 0.4937 at time of
writing with AUD at the mercy of souring risk sentiment. AUD/GBP was
traded as low as 0.4906 which is close to the lows we saw a couple of weeks ago
before it managed to recover some of the losses. The Pound made some gains
overnight against the USD also which encouraged GBP confidence and helped push
us lower. No other news to report.
NZD
AUD has bucked the trend here, continuing a recovery since
falling below parity earlier in March. The AUD is trading just below 1.03
against the Kiwi after failing to consolidate above the big number figure after
having breached the level multiple times in the past 24 hours. Not helping the
Kiwi was a predictably grim reading from the NZD Business Confidence Survey
that came in a -63.5 reading, smashing already bleak forecasts of -19.4. No
other data to report.