Author Steven Oram
The Australian Dollar opens higher than yesterday as risk sentiment rebounded across markets amid hopes that US lawmakers will reach an agreement on a stimulus package to support the economy. In currency markets, the US Dollar remained under pressure, while the AUD and NZD both made back ground, while improved risk sentiment has seen the JPY sold off. The British Pound has been the best performer of major currencies, rebounding off multi-year lows seen last week, despite weak data released overnight.
US Congress Nearing Agreement
In the U.S, senior Democrat and Republicans said they were close to a deal on a $2trillion coronavirus economic stimulus package. Wall Street jumped back from 3 year lows with the Dow Jones up by around 8% this morning. However, the U.S Dollar remains under pressure after yesterday’s Federal Reserve Quantitative Easing announcement where they agreed to buy an unlimited amount of bonds.
Global Data Showing Impact of Virus
Markets are finally getting a glimpse of the economic damage the Covid-19 pandemic has already caused. The service sector has been hit hard across the world as PMI data from Japan, Germany, France, and the UK all badly missed expectations. Eurozone service sector PMI sunk to a record low, pointing to a deep recession looming across the bloc.
The Day Ahead
As most local businesses wind down operations , financial markets will continue to be busy. The improvement in risk sentiment seen overnight could well be short lived as the fundamental outlook still remains bleak. The one thing that is for sure is volatility and uncertainty will remain in the coming days and weeks. Levels to watch on the AUDUSD would be a 10-day SMA (simple moving average) at 0.6010 that may cap any rallies and on the reverse a hold above 0.5700 should see the AUD consolidate for now.
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