Deepening Market Anxiety Weighs on Australian Dollar

Growing Risk Aversion Pushes Australian Dollar Lower

Another intense day of selling on the financial markets saw the Australian Dollar come under renewed pressure as risk appetite diminished further. With global disruption from the Covid-19 outbreak intensifying the appeal of the risk-sensitive Australian Dollar naturally declined as the risk of an economic slowdown grew. As March’s consumer inflation expectations reading also fell short of forecast this left AUD exchange rates on the back foot.

Unless market sentiment sees a significant improvement in the near term the antipodean currency looks set to shed further ground.

Covid-19 Anxiety Weighs on Pound

As the UK government stepped up its response to the Covid-19 outbreak the Pound fell further out of favour with investors. The rising odds of the first half of 2020 seeing a greater economic disruption than initially feared put GBP exchange rates under pressure. With the FTSE 100 experiencing its worst day of trading since 1987 there appeared little cause for confidence in the domestic outlook.

This sense of anxiety over the future health of the UK economy could keep the Pound biased to the downside ahead of the weekend.

Euro Slips in Spite of Lack of ECB Rate Cut

While the European Central Bank (ECB) surprised markets by withholding an interest rate cut this was not enough to shore up the softened Euro. As the central bank opted to deliver alternative stimulus measures, aiming to boost liquidity, the mood towards the single currency soured. Although ECB President Christine Lagarde called on Eurozone governments to do more through fiscal stimulus markets saw limited odds of such support materialising.

Confirmation that the German consumer price index remained steady at 1.7% on the year in February is unlikely to offer the Euro any particular boost.

Soft Producer Price Index Fails to Dent US Dollar

A disappointing dip in February’s producer price index was not enough to prevent the US Dollar pushing higher across the board last night. Even though signs point towards a weaker level of inflationary pressure within the world’s largest economy the growing sense of risk aversion helped to shore up USD exchange rates. With investors piling back into safe-haven assets the underwhelming inflation data was easily overshadowed.

While March’s University of Michigan consumer sentiment index looks set to fall the US Dollar could shrug off a weak reading as long as market anxiety lingers.

Oil Price Slide Drags Canadian Dollar Lower

The oil market rout continued overnight after the US announced a shock travel ban on the majority of EU nations. With market confidence further dwindling support for oil weakened further, leaving the commodity-correlated Canadian Dollar to trend lower across the board. Growing anxiety over the prospect of a severe global slowdown left CAD exchange rates without support.

Another weak month of existing home sales could push the Canadian Dollar lower still against its rivals tonight.

New Zealand Dollar Benefits from Rivals’ Weakness

Even though the general sense of market risk appetite diminished further on Thursday the New Zealand Dollar was able to find some modest traction against many of the majors. While the threat of a global slowdown could put a significant dampener on the New Zealand economy the New Zealand Dollar was able to capitalise on the relative weakness of its rivals.

Any fresh deterioration in investor sentiment may still dent NZD exchange rates heading into the weekend, however.

Data Releases

13th March 07:30 NZD Manufacturing PMI (FEB) 50.3
13th March 17:00 EUR Germany Consumer Price Index (YoY) (FEB F) 1.7%
13th March 23:00 CAD Existing Home Sales (MoM) (FEB)
14th March 00:00 USD University of Michigan Consumer Sentiment Index (MAR) 95

Louisa Heath

louisa.heath@torfx.com


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