By Rhys Miles
Whilst the extent of the contagion effect of the coronavirus will be ongoing for a while the financial markets appear to be content to continue on their merry way. In the week that Chinese businesses start to open their doors again after an enforced longer Chinese New Year break, global equities continue a record run. The Dow hit another high this week despite finishing absolutely flat last night. Asian equities and the ASX had particularly strong days yesterday.
No surprises that the AUD barely straddles the 0.6700 level against the USD given that the ongoing mixed bag of global variables makes it an easy sell until virus driven confusion settles down. Solid gains against the EUR at least offer some respite but even that was as a consequence of a weaker Euro. Overnight, UK quarterly GDP came out flat but monthly GDP was higher than forecast. Expectations of a BOE rate cut next month have been pared back.
US Fed chairman Powell didn’t surprise in his overnight testimony stating that US fundamentals were positive but the Fed is prepared to provide policy support should risks such as the coronavirus impact US growth. Locally, the RBNZ are little to no chance of cutting rates at midday.
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