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Australian dollar plunges lower as uncertainty floods markets

AUD - Australian Dollar

The Australian dollar plunged through trade on Thursday as investors' appetite for risk soured, prompting a flight to haven assets. Having touched early morning highs just shy of 0.70 US cents the AUD came under sustained selling pressure throughout the day as investor optimism surrounding the likelihood of a H2 economic rebound faltered, following a sobering assessment of economic conditions from the Federal Reserve. The Fed reiterated its concerns surrounding the Coronavirus and its impact on the broader US economy. The number of cases within the US alone surpassed 2 million on Thursday, evidence the country remains the global epicentre for the disease. With new hot spots appearing across the country, there is a sense the US will be embroiled in a battle against COVID-19 well into 2020 and most likely 2021 as appetite for social distancing and economic lockdown restrictions falter.

Equity markets plunged as investors looked to withdraw profits, cashing in on the recent upturn. The S&P 500 fell over 5% while the Eurostoxx 600 fell 4.1% as risk assets and commodity currencies were dumped. The AUD was the worst performer on the day falling 2% and slipping below 0.6850. The question now is, was this merely a short-term correction following the upturn of the last fortnight or the beginnings of a broader shift in risk sentiment.

Watch support at 0.6830 and 0.6780 as initial markers on any continued risk-off move.

Key Movers

Safe haven currencies led majors higher through trade on Thursday with the CHF, JPY and USD all benefiting from the shift in risk sentiment. Having lost nearly 5% through the last month the US dollar index jumped sharply, gaining 1% on the day as the AUD, NZD and CAD led commodity currencies lower while the Euro and GBP both suffered modest corrections. As equity markets plunged, investors looked to haven assets as demand for risk soured amid a shift in optimism surrounding the speed of an economic rebound. The Federal Reserve reiterated its concerns surrounding the impacts of the coronavirus as the number of cases in the US surpasses 2 million. The US now accounts for 27% of the world’s cases with new hotspots emerging across the country, suggesting a second wave of infections is imminent. With the States still in the throes of the deadly disease a full economic recovery is unlikely in 2020.

Sterling fell 1% as reports it will engage in intensified free trade discussions with the EU, reminded investors Brexit still looms larger and the likelihood of a hard break increase as we move closer to the official divorce date.

Attentions today remain squarely affixed to the risk narrative.

Expected Ranges

AUD/USD: 0.6730 - 0.6910 ▼

AUD/EUR: 0.5980 - 0.6150 ▼

GBP/AUD: 1.7980 - 1.8620 ▲

AUD/NZD: 1.0580 - 1.0720 ▼

AUD/CAD: 0.9280 - 0.9380 ▼