Posted on February 2, 2020 4:56 pm
It’s the start of a new trading week once again all eyes are on the Coronavirus. The virus is seen to be a threat to the global economy and as a result we have seen money move toward safe havens and away from China’s major trading partners. Last week the effects of this were most clearly seen in the Australian Dollar and New Zealand Dollar. This may well continue into the week ahead if we continue to see the virus spread at a rapid rate.
We may well see safe-haven flows resume in the US Dollar if the Coronavirus continues to make investors nervous.
The UK withdrew from the European Union at 11pm on 31st January 2020. The topic of conversation now moves towards a trade deal between the UK & EU. Trade negotiations will be the focus of attention for the next 11 months before the transition period ends abruptly on 31 December 2020.
This week’s data forced local banks to push back rate cut expectations. The decision did little to help the Australian Dollar which is still suffering as a result of traders becoming more risk averse. Of course a surprise cut at Tuesday’s meeting is still a possibility and would be bad news for the AUD.
China is Australia’s largest trading partner in terms of both imports and exports. Until we know the extent of the damage to the Chinese economy we may continue to see further downside pressure to the Aussie Dollar.