As the impact of Coronavirus continues to increase within Australia there remains concern that this commodity based economy will feel a sharp impact from the global slowdown that the virus is already causing – and on the back of devastating bush fires experienced at the turn of the year. This caused the Australian dollar to fall close to the 50p mark against the single currency at .5051 at its low, territory we have not seen since the 2008 financial crisis.
Tuesday’s release of minutes from the recent Reserve Bank of Australia (RBA) meeting confirmed that further monetary easing was something which the RBA were willing to implement in order to support the Australian economy. At already record lows of 0.75% the RBA again cut further to an unprecedented 0.5% in an attempt to ease the pressure on households and businesses alike and to free up access to low cost borrowing in an attempt to reignite spending.
The Australian dollar will have been hindered versus the euro as risky assets are liquidated in times of uncertainty and dramatic swings in value through volatile trading conditions, “There has been sharp falls in the prices of risky assets and markets were finding it difficult to price the risks, given their unprecedented nature,” the minutes showed.
Despite continued lock downs through large parts of Europe, the single currency (EUR) remains strong as the European Central Bank (ECB) acted to assure markets that business in Europe would be backed through their newly launched Pandemic Emergency Purchase Programme. Having drawn criticism from their lack of action during their recent policy meeting (just six days prior) the ECB announced a €750billion package to ease the impact of the coronavirus pandemic.
President of the ECB Christine Lagarde later took to Twitter to reiterate the ECB’s commitment to easing the impact of the virus spread on the economy stating “Extraordinary times require extraordinary action. There are no limits to our commitment to the euro. We are determined to use the full potential of our tools, within our mandate.” This no doubt helped the euro post its strongest performance in over a decade against the Australian dollar.
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