Australian Dollar makes fresh lows as US Dollar rebounds and virus spreads
Posted by OFX
AUD – Australian Dollar
The Australian dollar continued its downward slide through trade on Wednesday comfortably cruising through supports at 0.6585 to test fresh lows at 0.6550. Despite a marginal improvement in risk sentiment and uptick across equities AUD weakness persisted. The Coronavirus continued its spread outside of China with reported cases confirmed across Europe and the first case verified in Latin America, forcing markets to re-adjust macroeconomic and growth expectations.
Australia’s exposure to China and the amplified risk to global and domestic GDP expectations have driven the currency lower and as fears the coronavirus pandemic will continue to spread escalate the AUD will remain under increasing downside pressure, especially if the outbreak touches down in Australia. As attentions turn to today’s quarterly CAPEX report we expect any upside to have a largely muted impact on dollar value as risk demand continues to drive direction.
Key Movers
The US Dollar rebounded through trade on Wednesday, bouncing off two weeks lows as an uptick in equities and repositioning of monetary policy expectations pulled the currency higher. Having touched two week lows on Tuesday the dollar index pushed back through 99 as equities recovered losses suffered across the worst four day sell off in over a year and the coronavirus continued its worrying spread across Europe, while the first case reported in Latin America was confirmed.
Commentary from Fed Vice Chair Clarida also helped drive the dollar higher. Clarida confirmed, while the bank was monitoring the impacts of the coronavirus pandemic, it was still to early to suggest it will force a correction in the current monetary policy platform. The comments forced investors to reposition Fed rate expectations having priced in a higher chance of a rate cut earlier this week.
The Great British Pound fell through trade on Wednesday adjusted expectations surrounding the upcoming March Budget and an anticipated uptick in fiscal spending. Having rallied strongly in the aftermath of Rishi Sunak’s appointment as finance minister investors are now correcting positions and taking profit as the likelihood of a watered-down stimulus package increases. Having slipped back below 1.30 Sterling touched 1.2904.
Expected Ranges
AUD/USD: 0.6490 – 0.6630 ▼
AUD/EUR: 0.5990 – 0.6100 ▼
GBP/AUD: 1.9390 – 1.9920 ▲
AUD/NZD: 1.0350 – 1.0460 ▼
AUD/CAD: 0.8680 – 0.88 ▼
Posted by OFX
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