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AUD/USD trades at lowest level since March 2009

Published February 10, 2020

Author: Steve Oram

The flight to safety was extended over the weekend, and the Aussie dollar has suffered significant losses as a result. Opening with the AUD/USD falling 0.9% taking it to its lowest level in more than a decade.

The downward pressure looks set to remain, with the novel coronavirus extending its grip on markets. The number of deaths now exceeds the SARS virus, and some are officially calling the virus a pandemic.

It is more challenging than previous outbreaks because symptoms take longer to develop than other viruses.This week, many Chinese businesses are sending their employees back to work after the Lunar new year, and there are concerns this may increase the spread of the virus.

China has committed USD 10.26 billion to fight the virus, and the PBOC has indicated it will step up policy support. The economic impact is as yet very difficult to gauge, but economists are already predicting the virus could wipe as much as 0.3% off the global economy.

U.S. Non-farm Payrolls data added further pressure on the AUD, with the headline number of new jobs coming in at 225k, vs expectations of 160k, and Annual Earnings climbing at a rate of 3.1% vs expectations of 3.0%.

The Week Ahead

Central Bank Speeches

This week we’re likely to hear more about what central banks are thinking regarding the coronavirus, and any action that will be taken. There are speeches scheduled from chief of each the ECB, the BoE, the RBNZ, the RBA and the U.S. Fed – so there will be plenty to keep markets busy this week.

One of the underlying themes in 2020 is the lack of scope that central banks have available to add stimulus to their economies. Most central banks around the world are already maintaining highly accommodative policy settings and have little or no room to lower rates any further. Markets will be looking for clues as to what type of steps could be taken from here.

U.S. Inflation

Later this week, markets will take a close look at U.S. Consumer Price Index figures. Markets are expecting a reasonably high 2.5%, which would be supportive of current policy settings the Federal Reserve are running and the neutral outlook that markets are expecting.

 

 

 

 

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.