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Coronavirus unnerves currency markets

The strong start to the year for "risk-on" currencies is already a distant memory.

Growing fears about the coronavirus outbreak has pushed traders into safer currencies such as CHF or JPY and away from AUD, NZD and CAD.

This compounds the already flight to safe haven mood sparked by the Iran/US missile spat in early January.

Many countries including the US, New Zealand and Australia have imposed temporary bans on all foreign nationals travelling from or transiting through China.

Australian dollar: Virus, fires and rate uncertainty

AUD had a terrible first month of 2020, with AUD/USD currently trading below US67¢, close to an 11-year low. It has plunged almost 5 per cent this year.

AUD to USD - 90 day trend
AUD/USD - 90 day trend
ALERT: 90-DAY LOWS 🔔 |
AUD/USD at 0.669 is trading 2.4% below the 90-day average 0.6854 with a range 0.669 to 0.7017. ALERT: AUD/USD has dropped to 90-DAY LOWS.

Concerns about an economic slow-down from the recent bushfires plus that of the coronavirus on both China and Australia are the latest headwinds for the currency.

The Aussie also struggled against Japanese yen last week with AUD/JPY falling 2.6% for the week to 72.53.

AUD to JPY - 90 day trend
AUD/JPY - 90 day trend

Brexit and the virus have combined to push AUD/GBP down (4-day ▼ 2.2% 🔔) to trading around 0.51 at pre-Brexit vote (mid 2016) levels.

AUD to GBP - 90 day trend
AUD/GBP - 90 day trend

Also adding to the general pessimism is uncertainty about the rate outlook with markets unsure whether the RBA will cut rates sooner rather than later.

CAD dragged down by Oil

The Canadian Dollar has been impacted with lower oil prices from the decision by Chinese authorities to extend the lunar break to February 9 – 10 days longer than planned – leading to reduced demand for oil.

However, the Loonie did better than the Aussie and Kiwi dollar, with both antipodean currencies more closely connected to the Chinese economy.

CAD to USD - 90 day trend
CAD/USD - 90 day trend

Euro a little listless post Brexit

Against the Brexit powered pound EUR/GBP recently hit a 30 day low under 0.84 and looks set to head back towards the mid-December low against sterling.

EUR/USD at 1.1084 is trading sideways near the 90-day average 1.1093.

EUR to USD - 90 day trend
EUR/USD - 90 day trend

GBP strong; Brexit next steps

Sterling has spent the past 3 or so years pushed around by the politics of the UK’s departure from the EU. Now that Britain has formally left the union this looks set to continue with any news — true or otherwise — about the Brexit negotiations affecting the pound.

But markets continue to anticpate interest rate cuts later in the year, with markets pricing a more than 75 per cent chance of a reduction by September.

Meanwhile GBP/USD has climbed modestly, trading to a 14-day high on Feb 1st above $1.32 against the dollar after the Bank of England decided not to cut interest rates last week.

GBP to USD - 90 day trend
GBP/USD - 90 day trend

Against the euro GBP/EUR recently hit a 30 day high over 1.19 and looks set to head back towards the mid-December high of 1.20 against the common currency.

 

Further Reading

 

New Year Optimism Retreats on US/Iran Tension

The threat of a proxy war between the US and Iran in Iraq has pared back some of the recent gains of “risk-on” currencies.

Last update: 8 Jan, 2020

Disruptors Challenging Australian Banks in Forex Price and Service: ACCC Report

Key Takeaways from the ACCC inquiry into currency conversion services. BestExchangeRates referenced among comparison sites playing an important role in customer awareness of the excessive currency margins charged by banks.

Last update: 11 Dec, 2019

AUD/GBP Between a Rock and a Hard Place – USD Strength

AUD/GBP versus AUD/USD and GBP/USD

Both the Australian dollar and British pound sterling have had a hard time of late caught between the rock of the China/US trade war and the Brexit hard place.

Last update: 7 Jan, 2020

  

Posted to: News Travel

 
   

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