Risk off as coronavirus marks grim milestone

Daily Currency Update

AUD - Australian DollarThe Australian dollar fell through trade on Thursday marking a second consecutive daily depreciation as a decline in risk sentiment dominated direction. Over 1 million people have now been infected with the COVID19 virus as the pandemic shows little sign of slowing. Despite a colossal jump in US jobless claims overnight markets looked to the worlds base currency as demand for haven assets outstripped underlying macroeconomic fundamentals. The 3,000% jump in unemployment filings in the US highlights just how devastating the economic impact will be and suggests an extended period of fiscal stimulus and monetary policy support will be required, a prospect mirrored around the world and echoed by Prime Minister Morrison on Thursday. Morrison, suggested he fully expects the current environment will become the “new normal” for at least the next 6 months, stating, he would prefer to be up front and honest about the scale of lockdown measures and breadth of time required to get a handle on the outbreak rather than afford false hope that the situation will be contained in 2-3 weeks. While short term forecasts remain squarely affixed to the evolving pandemic longer term forecasts for the AUD vary wildly. Some analyst are forecasting an AUD rebound and push back toward 0.70 into the end of the year, while others are pricing in a sustained period of underperformance and dip below March lows at 0.55. While we fell the AUD is incredibly cheap at the current handle and represents a reasonable buying opportunity the success of any recovery depends solely on our ability to tackle and suppress the Coronavirus outbreak. The longer the virus maintains its stranglehold on the global economy the deeper the global recession that follows, a scenario that does not necessarily bode well for the AUD.