Australian Dollar (AUD) Steadies as Risk-Sentiment Recovers
The Australian Dollar US Dollar (AUD/USD) exchange rate held steady today, with the pairing currently trading around US$0.655 after the Reserve Bank of Australia (RBA) unexpectedly cut its interest rates from 0.75% to a record low of 0.5% amid coronavirus fears.
RBA Governor Philip Lowe was downbeat in his assessment, commenting:
‘The global outbreak of the coronavirus is expected to delay progress in Australia towards full employment and the inflation target… The coronavirus outbreak overseas is having a significant effect on the Australian economy at present, particularly in the education and travel sectors.’
The risk-sensitive ‘Aussie’ has also benefited from slowing cases of Covid-19 in China, Australia’s largest trading partner.
Tim Cook, the CEO of the tech giant Apple, also commented:
‘China is getting the coronavirus under control. You look at the numbers, they’re coming down day by day by day. I’m very optimistic there. [However, it] will take some time, but by and large, I think this is a temporary condition, not a long-term kind of thing.’
The Australian Dollar (AUD) has shown some recovery due to a recovery of risk sentiment, with hopes that a globally coordinated response to the Covid-19 outbreak could cap the spread of the virus.
US Dollar (USD) Sinks on Rising Fed Rate Cut Odds
The US Dollar (USD) continues to suffer from rising odds of a rate cut from the Federal Reserve as the coronavirus also threatens to impact the world’s largest economy.
US President Donald Trump also urged the Federal Reserve to cut its interest rates in a tweet:
‘As usual, [Fed Chair] Jay Powell and the Federal Reserve are slow to act. Germany and others are pumping money into their economies. Other Central Banks are much more aggressive. The U.S. should have, for all of the right reasons, the lowest Rate. We don’t, putting us at a competitive disadvantage. We should be leading, not following!’
US Dollar investors continue to remain jittery on the prospect of a weakening economy and further uncertainty over the global economy due to the spread of the coronavirus. And, with abating epidemic fears in China, the ‘Greenback’ has also lost some of its safe-haven appeal as risk sentiment steadily returns.
Today will see a speech from Loretta Mester, the President of the Federal Reserve Bank of Cleveland. Any dovish comments about the US economy would heighten Fed risk cut odds and weaken the USD/AUD exchange rate.
AUD/USD Outlook: Coronavirus Developments in Focus
Australian Dollar (AUD) investors will be looking ahead to tomorrow’s release of Australia’s growth report for the fourth-quarter. If the data confirms consensus and rises by 0.4% in the quarter, we could see the ‘Aussie’ rise.
US Dollar (USD) traders will be awaiting tomorrow’s release of February’s ISM Non-Manufacturing PMI. However, as this is expected to ease from 55.5 to 54.9, we could see the ‘Greenback’ fall on rising concerns for America’s economic growth going forward.
The AUD/USD exchange rate will continue to be driven by coronavirus developments this week. Any further escalation of the virus towards pandemic levels would weaken the risk-sensitive ‘Aussie’.