AUD - Australian Dollar
The Australian Dollar fell below 0.67 on Friday, representing its lowest level since August 2019. Risk assets were sold off across the board as markets digested a more serious outlook for the Coronavirus situation, with Australian equities expected to follow global indices lower during today’s trade. AUD/USD fell 0.45% on the day, with investors flocking to safer currencies such as JPY and CHF.
The Australian dollar is particularly vulnerable to the developments out of china due to its strong economic links with the worlds second largest economy. With more than a quarter of Australia’s 44B foreign tourism industry comprising Chinese demand, the industry is especially vulnerable to the fallout from the virus with ongoing travel restrictions expected to have a large impact on the domestic economy.
The dynamic situation has also added a layer of complexity to the RBA’s interest rate decision due on Tuesday. Although a rate cut has largely been ruled out, analysts will be closely watching the economic forecasts and surrounding commentary as a guide for future direction. We continue to expect the AUD to take its cues from developments on the spreading virus and associated economic impacts.
A barrage of economic data was released on Friday, only to be brushed aside by markets as the ongoing Coronavirus situation out of China demanded full attention. China’s steady manufacturing PMI’s were largely ignored, as were weaker than expected Euro area GDP figures. Global equities were sold off with the S&P500 down 1.8%, the DOW down 2% and the NASDAQ down 1.6%. European equities were also down around 1.3% on Friday with bond yields ticking lower and commodities also under pressure.
Safe haven currencies such as JPY and CHF were the best performers on the day as riskier currencies such as AUD and NZD were sold off. USD/JPY and USD/CHF both fell 0.6% whilst the USD index fell 0.5% on the day. GBP also performed well as Brexit was confirmed, although the bulk of the strength has been attributed to some delayed price action following the Bank of England’s unchanged monetary policy stance from the previous day.
This weeks calendar includes the RBA interest rate decision on Tuesday, NZ labour market data on Wednesday as well as Labour market data out of the USA later in the week. We expect markets to remain focused on the virus outbreak in China and will be looking at how markets fare on Monday as an indicator of the weeks direction.
0.6636 - 0.6703 ▼AUD/EUR:
0.5985 - 0.6070 ▼GBP/AUD:
1.9709 - 1.9780 ▲AUD/NZD:
1.0320 - 1.0364 ▼AUD/CAD:
0.8842 - 0.8877 ▼