Risk appetite sours forcing the AUD back below 0.64
Thursday 7 May, 2020
Daily Currency UpdateThe Australian Dollar fell through trade on Wednesday as markets adopted a guarded approach to risk after a slew of lackluster macroeconomic data sets dampened hopes for a bounce in economic activity. Having touched intraday highs at 0.6451 the AUD drifted lower through the latter half of the domestic session extending losses throughout overnight trading, touching 0.6397. Markets larger ignored the uptick in domestic retails sales as a spending was bolstered by an uptick in supermarket sales as households stockpiled household items during the lockdown. Instead softness across European manufacturing data and a record correction in US preliminary payroll data forced investors to reassess expectations surrounding the timing of economic recovery, prompting a flight to safety and a correction in the AUD as a risk asset.
The AUD remains beholden to broader fluctuations in risks and until the lingering uncertainty surrounding the impact of the coronavirus is eliminated, additional extensions against haven assets will be hard won. Attentions today turn to domestic trade balance numbers, while Chinese services and trade balance date and US jobless claims dominate the international docket. Watch supports at 0.6380 and 0.62 with resistance on moves extending above 0.6450.
Key MoversThe USD and Japanese Yen were the benefactors of a push toward haven assets on Wednesday as a slew of dire macroeconomic data sets soured market demand for risk and prompted a flight to safety. The Japanese Yen rallied to 7-week highs while the US dollar index pushed back above 100, marking a new weekly peak as both the Euro and Pound Sterling tested two week lows. Softness across European and UK manufacturing data and US preliminary non-farm payroll numbers prompted markets to reassess expectations surrounding the speed and pace of the economic recovery in the wake of the coronavirus. Unemployment is expected to reach 16% in the US in April as job losses around the world continue to accumulate, heightening fears the looming recession and amplified rate of unemployment will delay any immediate or short-term bounce in economic activity. After the Global Financial Crisis and the Great Depression the reallocation of labour was slow, delaying the economic recovery and extending the recession. While there is some hope that the job losses today aren’t permanent and merely a product of the health lockdown the longer economic restrictions are in place the less likely some businesses and indeed industries will survive, meaning temporary job losses become permanent forcing consumers to rain in discretionary spending and subsequently slowing the pace of the recovery. We expect haven assets will remain well bid as uncertainty continues to plague broader recoveries in risk sentiment.
Attentions today turn to the Bank of England’s Monetary Policy and rate announcement, while US jobless claims dominate the North American Docket and ECB President Christine Lagarde address investors via a Bloomberg Webinar with analysts looking for reaction to yesterday’s German Constitutional Court ruling.
- AUD/USD: 0.6280 - 0.6530 ▼
- AUD/EUR: 0.5880 - 0.5990 ▼
- GBP/AUD: 1.9020 - 1.9480 ▼
- AUD/NZD: 1.0580 - 1.0720 ▲
- AUD/CAD: 0.9020 - 0.9120 ▲