Currency Update - Thursday 9th April 2020

AUD

We head into Easter with a firmer AUD thanks to renewed market
optimism continuing to shore up risk assets. Other risk assets like global
equities were firmer across the overboard, encouraged by the prospect of
further stimulus from the US along with reports that the OPEC emergency meeting
may deliver a 10m barrel per day supply cut, helping oil lift 11%. The AUD
found bidders across the majors, breaking out higher against important
resistance levels that had been unsuccessfully tested earlier in the week. Ahead
today we have the RBA Financial Stability Review which normally is of moderate
impact however given the current climate and how little we currently know about
virus-related impacts on Australia’s economy it will likely be paid more
heed. 

USD

The AUD has broken out higher against the US lifting to 0.6237
at time of writing - the highest we’ve seen since the middle of March. Markets
are finding confidence in the response by central banks and the flattening of
the infection curve in several major epicentres. Bids are coming in thick and
fast for risk assets around the world. The S&P and Dow Jones were both up
3.5%, adding to recent gains while US yields and the US Dollar Index remained
fairly stable. All eyes will be on the next round of US initial jobless claims
for the week ending on the 4th of April, set to come out this evening. The last
two weeks have seen a staggering 10m total claims be processed, blowing away
the previous 2 week record of 1.4m. The expectation is an additional 5m
unemployment claims tonight, however given the massively overloaded submission
systems in several states there may be a considerable backlog that means this
could be the largest submission since the pandemic began. Expect to see some
turbulence for the AUD if the jobless claims exceed expectations, or even
worse, exceed the previous week’s record of 6.65m.

EUR

AUD continues to bank steady gains against EUR, markets trading
the pair at 0.5740 at time of writing. While risk has been heavily bid, the EUR
has had a more tepid response to the lift in market sentiment than the AUD. A
german think tank announced that they expected Q2 GDP in Germany to contract by
almost 10% with 2020 to fall by 4.2% before recovering in 2021. This is largely
in line with what many economists are expecting for most countries around the
world (with the expectation that the lockdowns will not continue indefinitely
and will instead be eased sooner rather than later). Euro equities reflected
the bleaker picture which were heavy throughout the session, opening with
losses of around 1.5%. No other data to report.

GBP

The AUD is back above 0.50 for the second tie this
week, markets are trading the pair at 0.5033 at time of writing. The UK is
struggling after another sharp rise in confirmed cases as well as deaths with
hundreds more expected for the remainder of the week which is weighing on the
Pound. UK GDP is due for release tonight.

NZD

AUDNZD continues to march higher with the pair now being traded
at 1.0365 at time of writing. Australia’s confirmed cases remain low and the
pandemic appears under the control and with China’s resumption of trade
there is a growing economic argument for the resource rich AUD.