Currency Update - Wednesday 8th April 2020

AUD

Markets are trading with more confidence in the past 24 hours as
the pandemic is showing signs of leveling off in key areas around the world.
Global equity markets were generally higher and the USD faced selling pressure
as risk finds some renewed appeal. The seven day rolling averages for new cases
and deaths are now clearly falling in Spain and Italy and based on that
pattern, Germany’s deaths may also decline this week. In the US, the downshift
in confirmed case growth reported Sunday continued into Monday, with the number
of confirmed cases rising by 8.8%, a bit less than Sunday’s 9.1% increase. The
flattening of the curve is exciting markets as it means an easing of
restrictions in some jurisdictions. It’s not all good news of course as new
restrictions are still being imposed in other parts of the world such as Japan,
Russia, Singapore and Turkey and in many areas the pandemic is picking up
momentum. However the signals we’re seeing confirm that the measures put in
place are working to slow the spread and this is enough to give risk much more
appeal than in previous weeks. This isn’t to discount the possibility of
further volatility in future and businesses do need to prepare for the worst as
while the pandemic may be showing signs of slowing down, the economic damage
has yet to be accounted for. The RBA’s commentary yesterday after keeping rates
on hold confirmed this fear as they expect our 0.25% interest rate to be the
new normal until full employment can be restored; an outcome they expect to take
years to achieve.

USD

The AUD managed to trade past the 0.62 handle against the USD
overnight before we ran into resistance with short sellers getting us back down
0.6173 where we trade at time of writing. The US Dollar Index fell overnight
with losses sustained across the board, including the Euro, with markets buying
up depressed risk assets in the belief that the worst may be behind us. US
equity markets had mixed results including the S&P 500 which drifted off in
late trade finish the day flat despite being up as much as 4.2% earlier in the
day. US yields found some love with the 10 year space gaining 5 basis points
while oil fell a further 6.5%. The pandemic itself has claimed the lives of
another 1877 Americans in the past 24 hours with the death toll expected to
skyrocket throughout the week. The reaction from markets is based on the
flattening of new confirmed cases however the situation in the US remains dire
with their large population and autonomy of US states acting against them in
controlling the pandemic. A quiet day data wise ahead so markets will be glued
to news of the pandemic for direction on how much risk they are willing to
accept. 0.62 will be the level to test if we do see further appetite for risk.

EUR

AUD/EUR attempted to move higher past the 0.57 level but came up
short and was quickly sold back down with markets trading the pair at 0.5665 at
time of writing. European stocks came back to life with 2 and 4% gains for the
majors in early trade. Tempering market reactions was an increase in daily
Covid-19 deaths and new cases however the EUR did find itself broadly stronger,
riding the wave of optimism sweeping markets. No other data to report.

GBP

The AUD was one of the best performers in the past 24 hours and
we found particular strength against the Pound will markets trading the pair up
to a high of 0.5030 before running into resistance. The AUD moved sharply lower
back below 0.50 but is attempting to consolidate around the 0.4990 level.
Helping lift the AUD was a plummeting figure in UK retail footfall across
bricks and mortar destinations with a decline of 75% for the week and 81% last
week. No other data ahead.

NZD

The AUD found another big win against the Kiwi with markets
trading up to a high of 1.0350. We managed to hold onto the 1.03 handle with
the AUD still attempting to consolidate around 1.0320. The antipodeans are
perhaps benefitting from their geography amid the crisis with both countries
showing massively slowed Covid-19 numbers which is helping ease market fears.