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AUD absorbing a lot of bad news

Published February 11, 2020

Author : Brett Gordon

The US dollar is coming off an impressive week that saw it gain nearly 1.4% against a basket of its peers.  Although it has pulled back slightly this morning, strong US economic data as of late has propelled the dollar to its highest level since mid-October. Concern over the coronavirus fallout and lack of economic growth outside of the US is also propping up the dollar by weighing on some of its major counterparts such as the euro, pound, and other risk adverse currencies like our Aussie Dollar.

The AUD has lost further ground overnight as coronavirus concerns continue to dominate global markets.  The economic impact of the virus remains severe with a growing number of firms in China shutting down production.  Data released out of China yesterday was however fairly positive with January CPI data coming in ahead of expectations.  But the impact of the virus won’t have yet filtered down to economic data and the Chinese government is still expected to add significant liquidity to the financial system to support the economy during this difficult time.

The economic calendar is light today with nothing of note on the local front, overseas factors expected to continue to drive the direction of the AUD.  Later tonight we have the release of UK GDP numbers with markets expecting a flat result.  Overnight, Fed Chairman Powell will give his latest testimony to US lawmakers, followed by a Q & A session.

Tomorrow has RBNZ decision on interest rates in our region .  Markets have priced in no change to the OCR, but the Bank is expected to keep the option of further rates very much on the table.  However, there have been a number of commentators suggesting that a 0.5% cut tomorrow is not totally out of the question, to provide some sort of insurance against the impact of coronavirus on the NZ economy.

 

 

 

Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (Australia) Pty Ltd on 30 March 2020.

Rees Logan, Adam Nikitins and Stewart McCallum were appointed Joint and Several Voluntary Administrators of EncoreFX (NZ) Limited on 30 March 2020.

Any queries regarding the Administrations should be directed to encorefx@au.ey.com.