Compass Global Markets' Blog

Market Update - 19th October 2020 - AUD Consolidates Above 0.7000 As Victorian Restrictions Ease

Posted by Patrick Downes on October 19, 2020 at 9:17 AM

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Holding Above 0.7000:

Since Covid kicked off in March, AUD/USD has traded as low as 0.55 and as high as 0.74, highlighting just how volatile markets have been this year. More recently, we've settled above 0.70 thanks to Australia having again been one of the best performing economies during a crisis, you'll all remember the same thing played out during the GFC (cleanest shirt in the dirty laundry and no recession). Versus all the other major currencies the AUD has displayed a similar pattern, initially crushed in March only to rally consistently through the remainder of the year. AUD/EUR and AUD/GBP are currently above 0.60 and 0.54 respectively.

Where are we heading?

Well, that is the million dollar question and if I could predict it with any certainty I'd have a one way ticket to eternal riches. But the truth is, Australia has weathered the Covid storm particularly well, case numbers have never really got out of hand other than in my home state of Victoria (max 700+ a day). But Vic is coming out the other end and with that we should see a solid amount of optimism and growth in this region. The lifting of border restrictions between the states should follow and with that domestic travel should boom as an alternative to international travel - all of this is bullish for the Aussie economy and the AUD. The RBA has been particularly accommodative and has a clear mandate to keep rates low via a form of Aussie Q.E and direct intervention via their monthly cash rate decision - currently rates are on hold at 0.25% but expectations are that we could see another shot in the arm with a rate cut to 0.10% or something similar.

I remain pretty optimistic (as I always am) and think the worst is behind us. Both state and federal government stimulus in the hundreds of billions of dollars sets us up well for the coming years and growth shouldn't be too hard to come by via a booming domestic and consumer driven economy.

Vaccine Rolls Out In China:

In China, a vaccine for SARS-CoV-2 has started to be deployed across the country. The vaccine is safe and triggers the antibody response and can be taken at any of the major hospitals across the country. This bodes well for the trials by Astra Zeneca in the U.K and those in other parts of the world including the U.S.

AUD EXCHANGE RATES:

AUD/USD – 0.7044

AUD/GBP – 0.5442

AUD/EUR – 0.6003

AUD/NZD – 1.0711

AUD/JPY – 74.214

OTHER MARKETS:

All Ords (XAO) – 6,385

Gold – A$2,682/oz

Silver –  A$34.12/oz

Oil – US$40.94 barrel

DATA RELEASES TODAY:

CNY - GDP q/y at 1:00pm

USD - Fed Chair Powell Speaks at 11:00pm

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick - 0431 278 632 

  Email Patrick: patrick@compassmarkets.com

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 DISCLOSURE AND DISCLAIMER - GENERAL ADVICE WARNING
The information provided in this report has been prepared without taking into account your particular objectives, financial situation or needs. You should consider whether our products are appropriate for you and read the FSG and PDS which are available on this website.
This report and must not be copied, either in whole or in part, or distributed to any other person.
All references to prices, amounts and currency are in Australian dollars unless otherwise noted.
This report is provided for Australian residents only and is not intended for use by residents of any other country.

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