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AUD rebounds from 18 year low

Published March 20, 2020

Author George Hopkinson

  •           AUD/USD rebounds from lowest level since October 2002
  •           Australia Unemployment rate slips to 5.1 percent
  •           oil plunges to 18-year low
  •           Gold falls more than 1 percent
  •           ECB announces asset purchase program
  •           Pound dives to lowest since mid-80’s

The Australian dollar slumped to a fresh near 18-year low near the 0.5500 handle, amid worries over tightening liquidity triggered by the coronavirus pandemic. However, the major attempted a minor recovery after the Reserve Bank of Australia pumped a record A$12.7 billion into the banking system and made an emergency rate cut to 0.25%.

The currency pair was also supported by data showing Australia’s February month seasonally adjusted Employment Change rose beyond 10K forecast and 13.5K prior figures. The unemployment rate declined below the 5.3 percent expected. The Aussie starts today 200 points higher than yesterday’s low of 0.5506, its lowest since Oct. 2002.

The (DXY) dollar index rallied after the U.S. Federal Reserve promised a liquidity facility for money market mutual funds, while U.S. President Donald Trump moved to accelerate production of desperately needed medical equipment to battle the virus pandemic. The greenback against a basket of currencies traded 0.1 percent up at 101.06, having touched a high of 101.74 on Wednesday, its highest since March 2017.

The EUR surged, rebounding from a near 4-week low hit in the previous session after the European Central Bank announced additional measures in response to the coronavirus outbreak. The ECB launched a 750 billion euro ($818 billion) emergency bond purchase programme to push down borrowing costs in a bloc struggling with the economic fallout of coronavirus.

Crude oil prices plunged to multi-year lows as governments’ worldwide accelerated lockdowns to counter the coronavirus pandemic. International benchmark Brent crude was hit a low of $25.26, its lowest since Sept. 2003. U.S. West Texas Intermediate fell as low as $20.08 on Wednesday, its lowest since Feb. 2002.

Gold prices declined more than 1 percent as the European Central Bank’s measures to mitigate the economic effects of the coronavirus epidemic lifted investor sentiment.

The rush for liquidity is dominating markets. Investors will continue to track overall market sentiment, ahead of U.S. economic releases this evening.

 

 

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.