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AUD Spikes higher on Virus easing and RBNZ Hawkish Statement

Published February 13, 2020

Author Steve Oram

Global market sentiment has continued to improve as China reported the lowest number of new coronavirus cases since late January.  Commodity prices are generally firmer and global equity prices reached new highs.  Whilst the issue is by no way resolved and even WHO Director-General still states this news must be interpreted with extreme caution.  Commodity based currencies such as the AUD, NZD and CAD have all performed well overnight.

The Kiwi Dollar begins the day over 1% higher, holding on to gains made yesterday afternoon after the RBNZ announced no change to the Official Cash Rate of 1.0%.  This led to an associated rise in the AUD as often happens when our cousins across the ditch have a rally in their currency.

While yesterdays no change decision from the RBNZ was expected, it was the accompanying statement that gave the NZD a boost.  The Bank has moved to a neutral policy bias shown by steady OCR projections for the next year and removed previous language about adding more monetary stimulus if required.

Eurozone industrial output fell 2.1% from last month, its biggest contraction since 2016.  The fall was driven by a massive drop in capital goods output and is in line with a similarly poor reading out of Germany last week. The euro is down against most of the majors (except the yen), but the losses against the US dollar are muted as overall positive market sentiment is weighing on the greenback.

The New Hampshire primary results showed Bernie Sanders pulling out a narrow win, while Joe Biden’s campaign appears to be in freefall.  Moderate candidate Pete Buttigieg finished only a percentage-point back of the democratic-socialist Sanders, as the race between the moderate and more progressive arms of the Democratic party looks to be heating up.  The fight for the Democratic nomination is going to be watched closely by markets down the stretch, as a nomination for Sanders or another far-left candidate is expected to weigh on risk assets.

The Day Ahead

A bit quieter than yesterday, some central bankers speaking but not much else of note, overseas the next major data release is tonight’s US CPI number for January.

 

 

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.