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Global risk aversion accelerates this week, prompting central banks to jump in action to combat the coronavirus fallout, including an unprecedented move by the Reserve Bank of Australia. This sent the Aussie crashing to reach and hold the “biggest loser status” by the Friday close.
Australian Headlines and Economic data
Monday:
- RBA ready for bond buying on Thursday
- ASX suffers worst one-day fall in history
- Australia’s central bank injects $3.6 bln liquidity into banking system
- Big risk aversion day as traders priced in the growing probability of a big hit to the global economy by the coronavirus pandemic, now realized after by the latest stimulative actions needed announced by the Bank of Japan, the Federal Reserve and the Reserve Bank of New Zealand right at the start of the week.
Tuesday:
- Australian house prices were up 3.9% in the quarter ending in Dec. 19. vs. 4.7% in the previous quarter
- Coronavirus to leave Australian economy in the doldrums for some time, says Reserve Bank
Wednesday:
- Australia declares emergency, warns coronavirus crisis could last six months
- Leading index shows “Australia vulnerable”
- Australia’s preliminary retail turnover rises 0.4% in February
- Along with the bearish events from Australia to send the Aussie lower, it was another big risk aversion day in the financial markets, which actually saw a break in the usual risk behavior relationships as even bonds and gold fell. This is likely due to the rising concerns of bank liquidity, an extreme demand for U.S. dollars, and the rising probability of a deep global recession.
Thursday:
- RBA cuts interest rates for second time in a month, starts QE
- Australia saw 26.7K increase in hiring for Feb vs. 8.5K forecast
- The Aussie found a bottom on the session, likely on a big shift in risk sentiment towards positive during Asia trade. This is likely a reaction to the continued stream of stimulus actions by global central banks, including a €750bn bond-buying program from the ECB, interest rate cuts and QE from the RBA, and the announcement of a third coronavirus aid package this week from U.S. lawmakers.
Friday:
- After a continued risk-on rally during the Asia session for the Aussie, sentiment turned during the U.S. session likely moving on counter currency news and coronavirus updates, including actions to limit the accelerating number of cases of coronavirus, and the damage it is doing to financial market liquidity and the economy.
- In case you missed it, here is a cheat sheet on Who Has Done What for Their Economies Since the Coronavirus Pandemic Hit