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Aussie spike checked as reported cases of Coronavirus dampens risk demand

AUD - Australian Dollar

The Australian dollar tracked sideways, struggling to break above 0.6750 as investors remain wary and reluctant to extend gains as the uncertainties surrounding the coronavirus were amplified Thursday. The number of reported cases in China spiked, re-igniting fears the virus will continue to proliferate at an unchecked pace, further dampening the global growth outlook. Dipping during the Asian session the AUD touched intraday lows at 0.6707 before finding some support and bouncing between 0.6745 and 0.6720 through the rest of the day.

The coronavirus remains the primary driver governing AUD direction as headline news updates prompt shifts in risk sentiment and amendments in expectations as to the broader economic impact. At present the AUD appears well supported at 0.6680, however a number of breaks below this handle suggest a consolidated move lower is possible should conditions worsen, and risk appetite evaporate completely. Australia’s close economic ties and reliance on the juggernaut that is the Chinese economy leaves the AUD particularly vulnerable to adverse headline updates. With little of note on the domestic macroeconomic docket today we expect the AUD to maintain recent ranges into the weekly close.

Key Movers

The Euro tracked lower through trade on Thursday touching fresh multi-year lows at 1.0834 as market demand for risk faded and investors looked to short the combined currency. A string of soft macroeconomic data sets and a clouded or bleak growth outlook have prompted markets to dump the Euro and chase a higher yield return.

The Great British Pound was the days big mover, jumping after the resignation of finance minister Sajid Javid. Markets speculated that the new chancellor of the exchequer, Rishi Sunak, will drive fiscal expansion, lower capital gains taxes, issue tax cuts and increase investment infrastructure spending. Sterling rallied back through 1.30 to touch 1.3068.

Attentions today turn to US retail sales data as the headline item on the macroeconomic docket.

Expected Ranges

AUD/USD: 0.6680 - 0.6750 ▼

AUD/EUR: 0.6130 - 0.6230 ▲

GBP/AUD: 1.9080 - 1.9530 ▲

AUD/NZD: 1.0410 - 1.0490 ▲

AUD/CAD: 0.8880 - 0.8930 ▼