Latest Bout of Covid-19 Anxiety Drags on Australian Dollar US Dollar (AUD/USD) Exchange Rate
Mounting anxiety over the spread of Covid-19 saw the Australian Dollar to US Dollar (AUD/USD) exchange rate shedding fresh ground this morning.
With cases outside of China continuing to grow, along with fresh fatalities in Italy and Iran, investors remained in a resolutely risk-averse mood.
Support for the Australian Dollar (AUD) also weakened in response to last night’s ANZ Roy Morgan weekly consumer confidence index, which dropped from 109.1 to 108.3.
Although this was not a severe decline this softening still left AUD exchange rates vulnerable to additional selling pressure, with confidence in the Australian outlook continuing to diminish.
Softer Fed Manufacturing Index to Limit US Dollar Upside
The mood towards the US Dollar (USD) could sour this afternoon, however, if February’s Richmond Fed manufacturing index weakens as forecast.
With confidence in the underlying health of the US economy already weakened any deterioration here could see USD exchange rates extending their recent losses.
While the US still looks set to deliver a solid quarter of growth in the first three months of 2020 any evidence of softening growth momentum could still weigh on the US Dollar.
However, if the latest US consumer confidence index picks up on the month as forecast any potential for an AUD/USD exchange rate recovery may prove limited.
Australian Dollar Looks for Boost on Stronger Private Capital Expenditure Reading
As long as worries over the likely global impact of the Covid-19 outbreak linger the Australian Dollar may struggle to return to a stronger footing against its rivals.
With global first quarter growth looking set to falter in response to the disruption prompted by the virus the risk-sensitive antipodean currency remains biased to the downside.
Even so, Thursday’s fourth quarter private capital expenditure reading could help to put a floor under the AUD/USD exchange rate in the short term.
Forecasts suggest a solid quarterly rebound in expenditure, pointing towards a greater degree of confidence in the domestic outlook.
Unless expenditure shows fresh signs of slowing the Australian Dollar is likely to find some encouragement, even as the risk of a potential Reserve Bank of Australia (RBA) interest rate cut remains.
Fresh Signs of Federal Reserve Dovishness May Weigh on US Dollar Demand
Comments from Federal Reserve policymakers could drive additional AUD/USD exchange rate volatility over the coming days.
As the Fed has already shown signs of renewed anxiety in the face of the Covid-19 outbreak markets are keen to gauge the outlook of additional policymakers.
If the central bank appears to be leaning towards greater dovishness once again this could weigh heavily on US Dollar demand as investors price in higher odds of a potential 2020 interest rate cut.
With Thursday’s durable goods orders figure expected to show a sharp monthly decline, meanwhile, USD exchange rates could face additional downside pressure.
Even a stronger level of safe-haven demand may not be enough to shake off the impact of underwhelming domestic data, paving the way to an AUD/USD exchange rate rally.