AUD Weekly Review (Feb. 3 – 7)

Positive global risk sentiment and the Reserve Bank of Australia had traders buying up Aussies early in the week, enough to withstand an end-of-week reversal to beat most of the major currencies into the weekend.

Australia Headlines and Economic data

Monday:

• Australian manufacturing PMI drops to 45.5, worst sentiment since 2015
• Australian home prices start year on strong note, building to follow
• ANZ Australian Job Ads increased by 3.8% in January 2020 following a 5.7% fall in December 2019
• Commonwealth Bank Australian Manufacturing PMI: 49.6 in Jan. vs. 49.2 in Dec.
  China iron ore drops by most in nearly 15 months on virus fears
• Global risk sentiment started off positive this week, likely due to the news of stimulative efforts from the People’s Bank of China to support the likely hit China will take due to the Coronavirus outbreak.

Tuesday:

• RBA kept interest rates on hold at 0.75% as expected
• RBA: Signs that global growth slowdown is coming to an end, bushfires and coronavirus to pose short-term threats only
• Along with the not-so-dovish RBA statement, risk-on sentiment accelerated on Tuesday to send the Aussie higher, most likely on news that a vaccine for the Coronavirus is ready for testing.

Wednesday:

• AU construction downturn eases in January 2020 as house building activity improves
• Coronavirus will see economy shrink in March quarter: ANZ
• RBA’s Lowe: jobs key for further rate cuts
• Lowe: bushfires and the coronavirus will only be short-term problems for the Australian economy
• RBA says governments need to borrow more, rate cuts still on agenda
• Australia services activity growth signaled by PMI at start of 2020
• We can see a spike higher in the Aussie during the Wednesday session, possibly related to the news of a breakthrough in the race for a vaccine by a British scientist pushing global risk sentiment further positive.

Thursday:

• Australian retail sales slip 0.5% vs. projected 0.2% dip in December
• Australia’s trade surplus narrowed from 5.52B AUD to 5.22B AUD vs. 5.65B AUD forecast

Friday:

• RBA’s Lowe: risks of further rate cuts outweigh the benefits unless unemployment rate deteriorates
• Australian Performance of Services Index down to 47.4 (SA) in January
• RBA Statement of Monetary Policy for February
  • The risks to global growth remain on the downside and the near-term outlook is more uncertain.
  • GDP growth is expected to have been 2 per cent over 2019
  • Consumption remained subdued in the December quarter
  • Employment growth is expected to pick up but wages growth is expected to be unchanged
  • underlying inflation is expected to increase modestly to around 2 per cent over 2021
• Coronavirus related fears sent risk sentiment back to the negative on the Friday session  on news that 41 passengers on a cruise ship quarantined off Yokohama test positive for coronavirus, and concerns the outbreak will do much more economic damage to China than previously anticipated. The Australian dollar fell on the reversal of sentiment, but not enough to turn it red against most of the major for the week.