9th April 2020 - AUD outperforms as market prices better days ahead



Good morning

OVERNIGHT DATA AND HEADLINES


  • The number of coronavirus cases in New York state alone approached 150,000 on Wednesday, surpassing Spain for the most infections anywhere in the world, even as authorities warned the state's official death tally may understate the true toll. New York, the state considered the epicentre of the pandemic in the U.S, and neighbouring New Jersey again reported new single-day highs for coronavirus deaths. New York state has 149,316 reported cases compared to Spain's 146,690, according to a Reuters tally. The United States has recorded nearly 420,000 coronavirus cases and more than 14,300 deaths.

  • Bernie Sanders, a democratic socialist whose progressive agenda pushed the Democratic Party sharply to the left, ended his White House campaign on Wednesday, clearing the way for a Nov. 3 election battle between former Vice President Joe Biden and Republican President Donald Trump. Sanders, a onetime front-runner who promised to lead a grassroots political revolution into the White House, acknowledged he no longer had a path to victory after a string of decisive nominating contest losses to Biden but promised to work with his more moderate former rival to oust Trump. "I cannot in good conscience continue to mount a campaign that cannot win, and which would interfere with the important work required of all of us in this difficult hour," he said in a live streamed speech to supporters from his hometown of Burlington, Vermont. The departure of Sanders, Biden's last remaining rival in a field that once included more than two dozen candidates, sets up a long battle for the White House between the 77-year-old Biden and Trump, 73, who is seeking a second four-year term in office.

  • The U.S. government's massive effort to nurse the economy through the coronavirus crisis was billed as a send-money-and-don't-sweat-the-details flood of cash to people and businesses in a $22 trillion system that has ground to a halt. So far, the checks are not in the mail. From technological glitches to confusion over the fine points of policy, the delays are mounting. The federal government's muddled response risks deepening and lengthening a recession already historic for the speed of its onset. States are struggling to process a historic mountain of unemployment claims on outdated technology. Large corporations, including companies slammed by the "social distancing" edicts keeping people at home, remain in the dark on the details of promised loans. Small businesses by the millions are desperately seeking cash, while banks still lack the right paperwork days into a lending program. The Federal Reserve, quick to throw a backstop under large portions of the financial system and major corporations through open-ended bond purchases, has yet to complete a promised "Main Street" program of an all-encompassing safety net of credit. Making matters worse, the original $2.3 trillion in aid that was passed by Congress late last month isn't nearly enough, businesses warn. Every day that passes without federal money getting to people is "an unnecessary hit to businesses and households across the U.S.," said Gregory Daco, chief U.S. economist at Oxford Economics.

  • World equity markets moved higher and oil prices stabilised on hopes the coronavirus pandemic is peaking and that more government stimulus measures could be on the way.

  • U.S. stock markets jumped on hopeful signs about the coronavirus outbreak in the United States was close to a peak, with health insurers getting an additional lift from Bernie Sanders' decision to suspend his presidential campaign. The Dow Jones rose 779.71 points, or 3.44%, to 23,433.57, the S&P 500 gained 90.57 points, or 3.41%, to 2,749.98 and the Nasdaq added 203.64 points, or 2.58%, to 8,090.90.

CURRENCIES

  • The U.S. DXY index edged higher in choppy trading, the index flat to slightly higher on the day at 100.20. 

  • China’s CNY retreated from a three-week high as some of the optimism about a possible slowing in the coronavirus pandemic faded. Onshore CNY opened at 7.0600 and was last trading at 7.0620.  

  • EUR fell roughly 0.35% in late trading, falling from 1.0890 down towards 1.0850.

  • GBP made solid gains overnight, jumping up from 1.2300 to touch a 1.2426 peak before settling lower at 1.2377.

  • USDJPY was weaker, jumping up from 108.60 lows towards 108.90.

  • AUD charged higher, gaining 1.05% from 0.6120 lows towards a fresh high at 0.6241. Settled slightly lower at 0.6230.

  • NZD made a similar jump higher, from 0.5940 lows towards a 0.6030 high.

  • AUDNZD improved overnight from a 1.0290 low up towards 1.0370 high.

  • AUDEUR saw solid gains, up through 0.5700 to a 0.5743 high.


TREASURIES

  • U.S. Treasury yields were mixed following an auction of 30-year bonds that was better received than note auctions earlier this week and the release of minutes from the Federal Reserve's March meeting 

  • The yield on the benchmark U.S. 10-year note was up 4 basis points at 0.7738%.

  • The yield on the 30-year bond was last up 4.7 basis points at 1.3771%.

  • The two-year U.S. Treasury yield was at 0.2619%, down 2 basis points.

  • The gap between yields on two- and 10-year Treasury notes was at 50.30 basis points. That was about 6 basis points higher than at Tuesday's close, and the highest since late March.

  • Italy's 10-year bond yield rose as much as 20 basis points, hitting its highest since March 19 at 1.748% before slipping back. It was last up 5 bps at 1.65%. The 2-year yield was last up 12 bps at 0.69%.

  • Germany's 10-year yield was unchanged at -0.32%.

COMMODITIES

  • Gold prices held steady as investors awaited the release of minutes from the U.S. Federal Reserve's policy meeting. Spot gold was little changed at $1,648.43 per ounce.

  • Steel futures in China rose for a second consecutive session after the two-month lockdown in the Chinese city of Wuhan ended, raising hopes of an increase in demand as economic activities resume in the country. Benchmark iron ore futures on the Dalian Commodity Exchange, for May delivery, surged as much as 2.8% to 652 yuan per tonne. It was up 2.5% to 649 yuan a tonne. 

  • Aluminium prices slipped to their lowest level in more than four years as falling demand due to the new coronavirus and expectations of a large surplus this year were reinforced by rising stocks. Benchmark LME aluminium was down 0.8% at $1,465 a tonne, a drop of 20% since Jan. 22.

  • Other metals: Copper fell 0.7% to $5,005 a tonne; zinc was down 0.3% at $1,918; lead slid 1.1% to $1,717; tin was down 0.9% at $14,490; and nickel gained 0.3% to $11,510.

  • Oil futures strengthened late in the session, buoyed by hopes that OPEC and its allies will strike a production cut agreement on Thursday. Crude has collapsed in 2020 because of a slide in demand due to the coronavirus pandemic and excess supply. Brent dropped to $21.65, its lowest since 2002, on March 30. Brent crude settled up 97 cents, or 3%, at $32.84 a barrel. U.S. WTI crude rose $1.46, or 6.2%, to settle at $25.09 a barrel.

ECONOMIC CALENDAR TODAY


  • Australia - RBA’s financial stability review. A six monthly update comes at a time of exceptional instability.

  • Germany - Feb trade balance (last 13.8). Euro area economy to deteriorate sharply in coming months.

  • UK - Feb trade balance. Trade flows to exhibit significant volatility.

  • US - March PPI (last -0.6%, forecast -0.3%). Surprised to the downside in Feb.

  • US - Initial jobless claims (last 6.648mio). To be watched closely following two record breaking weeks.

  • US - Feb wholesale inventories (last -0.5%). Final read, prelim showed solid unwinding.


AUD THOUGHTS AND TECHNICAL ANALYSIS

AUD made a complete turn around in the last 24 hours, reversing losses from yesterday’s 0.6117 to trade up through 0.6200 at a fresh 0.6241 high.  

Markets largely shrugged off yesterdays S&P downgrade of Australia with risk on rallies in equities, copper, global bond yields and JPY sales assisting the lift in AUDJPY from 66.50 towards a near break at 68.00.

No local Economic data releases today apart from the RBA financial stability review. Judging from the recent commentary from the RBA of late this report shouldn’t contain too many surprises. Tonight’s centre stage will once again be dominated by the recent U.S. initial jobless claims after 2 consecutive weeks of jay dropping jobless numbers. Last week’s headline was 6.648mio claims. For the AUD, opens this morning at 0.6230 - the overnight rally breaking through the March 31 high and piercing the 61.8% Fibonacci level of 0.6685-0.5510 ((0.6237). AUD holds near the high as risk sentiment stays upbeat & USD remains heavy. Technicals lean bullish, RSIs rise, 10-DMA supports, daily bull hammer forms Should the rally persist longs will target the 0.6310/30 zone.



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