Currency Update - Monday 23rd March 2020
AUD
Sentiment has nose dived as the coronavirus outbreak brings more
mass closures and lockdowns around the world. We finished up last week on a
high note as markets looked favourably upon the moves made by the RBA to help
keep credit flowing through this difficult time. We moved up several percentage
points against the majors and ran into offer interest at these higher levels,
particularly against the USD. Other risk assets such as global equities
continued to plummet with the S&P500 dropping a further 4.3% to finish last
week down over 15% and marking the worst single week since the GFC. Oil was
also at the mercy of the ongoing pandemic and fell a further 11% to take the
week’s decline to 29%. There remains a significant issue of liquidity in
currency so prepare for big swings both up and down in the weeks to come.
USD
On Friday the AUD managed to climb to just shy of 0.60 after
starting the day over 3 cents lower. These heavy intraday trading swings are
expected to continue as a consequence of the low levels of liquidity impacting
currency markets. We open this morning just above the 0.58 handle in what is so
far a more stable morning. Knock on wood. After the Fed introduced measures to
help calm USD funding stresses which helped lift sentiment and when combined
with the RBA’s own response to the crisis helped the AUD to the levels we saw
Friday evening. Moving forward risk management and capital preservation are the
watch words of markets and while we open to a calmer market this morning we
need to prepare for significant swings in both directions. With the USD
remaining the safe haven for the world there remains significant AUD downside
risk to consider for businesses. To discuss how to manage risk in these
difficult times please do contact us on phone or email.
EUR
The AUD finished last week closing in on 0.56 against the EUR
however selling pressure quickly kicked in against the recovering AUD to push
us back down to 0.5427 at time of writing. Little in the way of EU data with no
attention paid to weaker than expected German PPI figures. The pandemic
continues to wreak havoc in Italy and now the numbers are quickly adding up in
Spain as other European governments ramp up their own measures to contain the
virus. The EUR remains heavily sold across the majors however the AUD is
perhaps the most heavily sold major currency in the world so we must prepare
for further downside risk as the economic damage accumulates and the pandemic
spreads.
GBP
Pound Sterling took some losses Friday as the AUD found some
bids but has since come off with markets trading the pair back down to 0.4953
at time of writing. UK PM Johnson announced that all bars, restaurants and
cafes had been ordered to close while the government would underwrite 80% of
the wages of staff unable to work due to measures taken to stop the spread.
NZD
The AUD has continued to rally against the NZD through the
weekend though it wasn’t without some volatility with a single hour on Saturday
morning featuring a 2 cent movement down and then back up again. There is precious
little liquidity in AUD/NZD so expect more volatility in the weeks to come.