AUD - Australian Dollar

The Australian dollar edged marginally higher through trade on Monday, bouncing off 11 year lows and creeping back through 0.66 US cents. Risk-off mood dominated markets and broader direction again as the coronavirus continues its worrying spread beyond China. With an uptick in the number of cases reported in Italy and the Middle East fears a global pandemic may be at hand, escalated Monday and forced a shift toward haven assets.

In this risk off environment the AUD will remain under pressure with upside gains capped on moves approaching 0.6650 and 0.6700, with supports at 0.6580 closely monitored for sign of an extended downward correction.

Key Movers

Traditional safe havens were the big winners on Monday as investors dumped risk assets in the face of widespread risk off sentiment. The JPY and CHF jumped higher as the number of coronavirus cases outside China surged again. Stocks and equities fell sharply, while Wall streets volatility index touched 6-month highs and gold rallied to a 7-year peak. Fears a global pandemic is at hand have forced markets to re-asses global growth estimates as the broader impact of the coronavirus continues to grow.

The USD downturn against the JPY and CHF continued through Monday as the risk of environment and last weeks macroeconomic miss amplified calls for a FOMC and Fed rate cut. Investors priced in an increased chance of an interest rate adjustment by June forcing the dollar index back toward 99 at 99.30.

The Great British pound fell through trade on Monday as risk off pushed markets to haven assets and away from sterling as fears the EU and UK will fail to reach a revised trade agreement by the end of the 11 month negotiation period. Losing 0.2%, cable touched 1.2930 and weakened against the Euro.

Attentions today remain with coronavirus headlines as the primary marker driving broader risk off sentiment.

Expected Ranges

AUD/USD: 0.6580 - 0.6690 ▼

AUD/EUR: 0.6050 - 0.6190 ▼

GBP/AUD: 1.9480 - 1.9650 ▼

AUD/NZD: 1.0380 - 1.0450 ▼

AUD/CAD: 0.8730 - 0.8820 ▲

AUD - Australian Dollar

On Friday the Australian dollar fell to a multi-year low of 0.6585 before bouncing back above 0.6600 to close the session. The Australian dollar is down nearly 6.0 per cent since the start of the year and hitting decade lows against its US counterpart. Economists said the Aussie could fall even lower, particularly if the coronavirus took a long time to contain and China's economy was shut down for an extended period.

The AUD/USD pair fell sharply on Friday after the release of the Australian Commonwealth Bank Services PMI fell to 48.4 in February, while the Commonwealth Bank Manufacturing PMI climbed to 49.8 in the same month, according to preliminary estimates. Looking ahead today and there are no scheduled releases in Australia although China will see the release of January Industrial Production and Retail Sales. If Chinese data does not meet market expectations the AUD/USD pair could well fall to fresh multi-year lows.

From a technical perspective, the AUD/USD pair is currently trading at 0.6598. We continue to expect support to hold on moves approaching 0.6570 while now any upward push will likely meet resistance around 0.6650.

Key Movers

The Greenback fell across the board on Friday, with the various USD indices down in the order of 0.4-0.6%, after a survey of purchasing managers showed U.S. business activity in the manufacturing and services sectors stalled in February and as investors fretted over the fast-spreading coronavirus. Services output contracted to 49.4. The Composite PMI fell to 49.6, in contraction territory for the first time since October 2013. Manufacturing PMI came in at 50.8 the lowest since August. In the US tonight we will see the release of the Chicago Fed National Activity Index and the Dallas Fed Manufacturing Business Index.

Expected Ranges

AUD/USD: 0.6450 - 0.6650 ▼

GBP/AUD: 1.9550 - 1.9750 ▲

AUD/NZD: 1.0350 - 1.0550 ▼

AUD/EUR: 0.6000 - 0.6200 ▼

AUD/CAD: 0.8650 - 0.8850 ▼

AUD - Australian Dollar

The Australian dollar tumbled through trade on Thursday, plumbing new 11 month lows as a disappointing labour market print and an uptick in risk off demand drove direction. The unemployment rate unexpectedly jumped through trade on Thursday increasing from 5.1% to 5.3%. While the uptick can be largely explained by an increase in the participation rate rather than a distinct slowdown in labour market performance the upturn still sparked calls for an imminent RBA rate cut and drove the AUD below 0.6650.

Despite China announcing a slowdown in the spread of the Coronavirus, its proliferation in other countries, namely, South Korea, Japan and Singapore amplified concerns the virus will linger for some months to come, increasing the scope and scale of the economic impact. With risk on demand largely evaporated the AUD touched intraday lows at 0.6615 and appears to have consolidated a break below supports at 0.6680 setting up a shift to lower bound ranges moving through the short term.

Key Movers

The US Dollar advance continued through trade on Thursday, touching three-year highs when valued against a basket of major currency counterparts. Sustained strength across key macroeconomic indicators and an economy that is largely immune to the threats of the coronavirus has helped fuel demand for the world’s base currency as a key safe haven play.

The Euro depreciation continued Thursday, posting intraday lows at 1.0780 driven by a persistent carry trade play and sustained softness across key macroeconomic indicators. The combined unit has struggled against the US dollar throughout the year to date as the mismatch between key major economic data sets highlights the gap in expected monetary policy programs moving through the year ahead. Having tumbled over 3% through the year to date attentions now turn to key services and manufacturing PMI data prints as markers guiding direction into the weekly close.

Despite an uptick in domestic retail sales the Great British Pound fell to intraday lows at 1.2849 through trade yesterday. Thursday’s downturn marks a 1.4% depreciation through the week thus far and sees sterling unwind all last weeks gains as mounting expectations for increased fiscal stimulus have abated and the likelihood of a Bank of England rate cut before year end gained further traction. Futures are now pricing an 80% chance of a rate cut by December, up from 69% on Wednesday.

Expected Ranges

AUD/USD: 0.6580 - 0.6680 ▼

AUD/EUR: 0.6080 - 0.6180 ▼

GBP/AUD: 1.9280 - 1.9630 ▲

AUD/NZD: 1.0380 - 1.0480 ▼

AUD/CAD: 0.8720 - 0.8840 ▼

AUD - Australian Dollar

The Australian dollar is weaker this morning when valued against the Greenback, falling to an overnight low of 0.6665 the lowest since February 9. The Aussie dollar has now fallen for a fifth consecutive day amid US dollar strength and continued coronavirus headlines. On the data front yesterday we saw the release of Westpac Leading Index which came in at 0.05% in January, slightly better than the previous 0.01%.

The last six months annualised growth rate fell from -0.28% in December to -0.46% in January. We also saw the release of Q4 Wage Price Index which saw wages continue to grow at an unimpressive pace, as expected, rising just 0.5% q/q in Q4 19. On a y/y basis wage growth remained at 2.2%, taking average 2019 wage growth to 2.28%.

Looking ahead today and we will see the release of the latest employment figures which is expected to have added 10,000 new jobs in January, after adding 28,900 in the previous month. The unemployment rate is expected to rise to 5.2% from 5.1% while the participation rate is seen steady at 66%. From a technical perspective, the AUD/USD pair is currently trading at 0.6678. We continue to expect support to hold on moves approaching 0.6660 while now any upward push will likely meet resistance around 0.6730.

Key Movers

The US Dollar Index (DXY) which measures a basket of major currencies against the greenback continued its rampant moves overnight hitting three-year highs. Improved risk appetite in markets and strong domestic data out of the United States saw movements out of traditional safe haven currencies such as the Japanese Yen, falling to nine-month lows and a 1.35% drop on the day’s trade.

The Federal Reserve released their monthly meeting minutes a couple of hours ago and noted that the current stance of monetary policy is appropriate. Holding rates between a range of 1.5% and 1.75% will give Chairman Jerome Powell time to analyse the current impact of the coronavirus for the local economy.

Core United States Producer Price Index for the year rose to 1.7% from 1.1% and rose 0.5% on a monthly basis, continuing the recent theme of positive economic data for the start of 2020.

The same could not be said for the EUR as it lost further ground, hitting lows yesterday of 1.0782 following a sharp decline in economic sentiment in Germany. A number of data releases will dictate any further decline for the common currency as ECB Monetary Policy Meeting accounts are due for release this evening.

Expected Ranges

AUD/USD: 0.6640 - 0.6710 ▼

GBP/AUD: 1.9100 - 1.9520 ▼

AUD/NZD: 1.0420 - 1.0490 ▼

AUD/EUR: 0.6150 - 0.6210 ▼

AUD/CAD: 0.8800 - 0.8870 ▼

AUD - Australian Dollar

The Australian dollar fell through trade on Tuesday as risk off sentiment and a dovish RBA minutes prompted a correction in the recent short-term upswing. The AUD slipped below 0.67 touching intraday lows at 0.6675 as markets appetite for risk shifted following Apple’s announcement it does not expect to meet revenue targets through Q1 2020 as the coronavirus dampens demand for sales in China. Apple’s revelation highlighted broader market concerns the coronavirus will have a direct deflationary impact on global consumer demand and economic growth forecasts. As demand for risk faltered the RBA minutes confirmed the RBA’s bias to further rate cuts and concerns surrounding the broader impact of the Coronavirus. The board recognised the outbreak posed significant downside risks to outlooks for China and, as a direct result of Australia’s high-level integration into the Chinese economy, there was heightened concerns the domestic growth outlook will be forced lower.

While supports remain in play on moves approaching 0.6680 our attentions now turn to todays quarterly wage price index and Thursday’s employment data. The RBA has long touted strength across the labour market as a key marker supporting neutrality in monetary policy. Softness across wage growth and a downturn in labour market performance could prompt a move below key technical supports as markets move to price in a rate adjustment. We expect resistance on moves above 0.6730 with a consolidate and extended move below 0.6680 possibly signalling a deeper downward correction.

Key Movers

Safe haven assets surged through trade on Tuesday with the Japanese Yen outperforming most major counterparts.

The Great British Pound edged higher as the new Finance Minister Rishi Sunak announced the budget would be unveiled as planned on March 11. Shrugging aside concerns conflicting views between the UK and EU would derail trade negotiations sterling pushed back through 1.30, touching 1.3047 before correcting lower into the mornings open.

The Euro tumbled through 1.08 Tuesday following a ZEW assessment of broad based German confidence. Sentiment among investors deteriorated well beyond initial estimates in February and highlighted concerns Europe’s largest economy and engine room is running out of steam. The poor print amplifies concerns services and manufacturing PMI data due Friday will show an alarming slowdown in broader European production further dampening growth expectations and widening the gap between the US and EU outlook. The combined currency has lost almost 4% through the year to date, with little incentive for investors to unwind recent shorts and carry trades. Having touched 1.0787 attentions now turn to Thursdays’ ECB monetary policy meeting minutes for any sign increased QE is imminent.

Expected Ranges

AUD/USD: 0.6630 - 0.6730 ▼

AUD/EUR: 0.6150 - 0.6230 ▲

GBP/AUD: 1.9330 - 1.9780 ▲

AUD/NZD: 1.0380 - 1.0530 ▲

AUD/CAD: 0.8790 - 0.8890 ▼

Australian Consumer Price Index for Q1/19 came in weaker than expected, falling well below the RBA’s 2-3% target range. The AUD dropped temporarily below the important 0.70 level but then managed to bounce back. The pace of inflation has weakened noticeably which is adding to the case for easier monetary policy. This is making the RBA meeting on the 7th May and RBA Statement on Monetary Policy on the 10th a lively event to keep a look out for.

Oil rallied on the news that the US would not renew its oil sanction waivers that allow countries to buy Iranian oil for 5 nations which included China, India, Japan, South Korea and Turkey. Currencies of oil importing nations such as INR and TRY suffered on the headline while currencies of exporting oil nations such as CAD and NOK strengthened. On Friday, Oil futures dropped 2.9% following mixed Headlines from Russia and US leaders.

The BoC left rates unchanged at 1.75% for the fourth time, as expected, maintaining its dovish tone as the economy faces a slowdown. Their GDP outlook for 2019 dropped to 1.2% from 1.7%, and to around 2% in 2020. USDCAD spiked to 1.3522 at the release of the headline. Governor Poloz afterwards emphasised patience and reiterated that the next move in rates is likely to be a hike than a cut, which help the USDSCAD fall back below the 1.35 handle.

Strong US data propelled the Greenback to increase +0.7% versus the Euro and the Loonie, +0.6% versus the Sterling, and +1.5% versus the Aussie dollar. US domestic GDP came in at 3.2%, when the expectation was 2.6%. Additional data showed that the number of Americans filing for unemployment benefits fell to its lowest level in almost 50 years. Furthermore, the Core Durable Goods Orders rose by the most in eight months in March, showing surprising strength. The USD Index lost some ground at the end of the week as market participants realised that 1.7% of the 3.2% GDP increase came from inventory accumulation and net exports (sparked by a big -3.7% drop in imports).

Japan’s Industrial production shrank at its fastest level since 2015, slipping 0.9% on the month for March as exports slumped. This is a leading indicator for GDP which probably shrank in the first quarter. Governor Haruhiko Kuroda launched a radical program to reflate prices nine years ago, however, the BOJ now projects that it won't accomplish its 2 percent inflation target at least through March 2022. The Japanese Yen was the best performer within the major currencies last week; it rallied 0.3 percent versus the US dollar and 1.8 percent versus the Aussie dollar.

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