AUD - Australian Dollar
The Australian dollar continued its march lower through trade on Monday, extending loses below 0.6150 and testing a break below 0.61, touching intraday lows at 0.6083. Wild fluctuations across currency and broader financial markets persisted as risk off plays continued to dominate direction and central banks scramble to prop up flailing economies. The Federal Reserve and RBNZ both slashed benchmark interest rates while the Bank of Japan doubled its ETF Quantitative Easing facility. These moves have amplified calls for the RBA to issue an out of cycle rate adjustment, doubling down on March’s 25 basis point reduction. Governor Lowe has suggested the RBA is prepared to introduce Quantitative Easing measures in a bid to stave off recession but at this point there is little idea of the timing of such a package. Traditionally the RBA has preferred to act within the bounds of its monthly monetary policy meetings but with April’s policy get-together still some three weeks away there seems little point in waiting, if relief can be delivered now and attentions turn to Thursday’s RBA Bulletin for any extended insight.
COVID-19 continues to dominate direction and with a global recession and inevitability we anticipate the AUD will come under sustained pressure through the foreseeable future. With health officials attempting to flatten the curve all reports suggest the virus will continue to proliferate well into 2020. With the economic impacts already being felt across key sectors of the economy, namely tourism and the arts, the wider reaching shock could force the AUD below 0.60 as existing handles for support continue to be knocked out.
Safe havens were the winners again through trade on Monday as extensive fiscal and monetary policy programs did little to ease broader market concerns and bolster appetite for risk. The Japanese yen jumped, while the CHF and Euro also gained against the USD following the Federal Reserve’s 75 basis point cut to interest rates. With the yield advantage eliminated throughout the last 3 weeks the USD has come under increasing downward pressure as investors scramble to correct net long positions. The dollar index fell a further 0.75% yet ongoing downside may be limited as liquidity pressures and the ongoing risk off mood push investors toward the world’s base currency. With little demand for commodity driven assets and emerging market currencies the USD remains a popular safe haven play propping up what would otherwise be an overtly aggressive downward correction.
Coronavirus fears continue to dominate direction and we expect the USD, JPY, Euro and CHF to remain well bid through the short term as investors scramble to find some certainty and stability.
0.6010 - 0.6250 ▼AUD/EUR:
0.5390 - 0.5600 ▼GBP/AUD:
1.9650 - 2.0270 ▲AUD/NZD:
0.9980 - 1.0260 ▼AUD/CAD:
0.8400 - 0.8600 ▲