Good shock and awe


Market Update 31 March 2020

As the Australian Government announce ways for businesses to go ‘into hibernation’, their package to support workers appeased the ASX immensely but didn’t translate into a true AUD move.
 
AUD/USD has been hostage more to USD moves as we enter quarter-end, and initially, a free-fall to 0.6070 was short-lived at the Tokyo fix – which reminds us of the market fragility. After that, a move to 0.6201 ensued as China PMI came out a massive 52 vs market expectations of 48 was very supportive.
 
So, China feels like we’re back to normal versus markets pricing in a recession. We would still back the latter with 65,000 cases added in 1 day alone and supply chains closing up in Europe. The trajectory of cases aside, how long it takes to reopen for business is now a crucial factor.
 
Having said that, Australia, for now, has a more enviable position of a low mortality rate, but the recovery rate is too low to call this any form of victory – it is still well placed for a rebound when it comes. This is why we’re more constructive in the medium to long term for AUD/USD.
 
The graphs below shows perspective. The US might have the highest cases of COVID-19, but per capita, it’s not the worst.

Are we peaking globally? The US isn’t..

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