Aussie vulnerable as coronavirus hammers market sentiment
Friday 31 January, 2020
Daily Currency UpdateAUD - Australian DollarThe Australian dollar’s depreciation continued through trade on Thursday as the coronavirus continues to dominate broader market plays and control risk demand. Having broken supports at 0.6750 and 0.6730 the AUD touched intraday lows at 0.6701 before edging marginally higher into the close. Having broken key supports already we expect the AUD will remain under sustained pressure as market sentiment deteriorates and concerns about the impact on growth escalate. The Australian economies exposure to China and the flow on effects on the demand for Australian raw materials and domestic tourism will likely weigh further on Growth forecast, hampering an already lackluster expansion outlook. Attentions remain squarely affixed to developments in the fight against the virus with further spread likely to see the AUD test supports at 0.67 and 0.6680.
Key MoversThe Great British Pound jumped through trade on Thursday following the Bank of England’s decision to leave interest rates on hold at 0.75%. The call surprised a majority of market analysts with just over 50% pricing in an interest rate reduction. A string of stronger data sets since the general election in December afforded the monetary policy setting committee a reprieve and enables them to hold onto at least some ammunition should it need to revive the economy in the wake of Britain’s European divorce. With a March rate adjustment all but priced out as well Sterling rallied through 1.31 to touch 1.3110. Investors however remain wary as today marks the UK official exit from the EU and starts the clock on an 11 month transition period wherein a new trade agreement must be reached. For Sterling to extend upside back toward 1.40 and beyond a new and favourable trade agreement must be reached quickly. The US dollar index fell through trade on Thursday as advanced GDP data indicated the US economy grew at its slowest annual pace in three years, while personal consumption fell dramatically. The soft prints fell short of both White House and Federal Reserve targets and increased the probability of a rate cut come March.
- AUD/USD: 0.6640 - 0.6780 ▼
- AUD/EUR: 0.6040 - 0.6130 ▼
- GBP/AUD: 1.9250 - 1.9750 ▲
- AUD/NZD: 1.0300 - 1.0400 ▲
- AUD/CAD: 0.8830 - 0.8930 ▼