Markets Adopt More Cautious Tone Overnight

Xe Corporate APAC

May 11, 2020 2 min read

The AUDUSD opens lower at 0.6488 this morning and the NZDUSD opens lower at 0.6075 this morning.

Markets adopted a more cautious tone overnight after Friday night’s strong rally. Most countries are starting to ease their lockdown restrictions as reported cases of Covid-19 continue to drop.

New Zealand announced yesterday it will drop down to level 2 alert on Thursday allowing most of the economy to re-open. Australia is taking a staggered approach with New South Wales and Western Australia easing restrictions this Friday but Victoria being more cautious.

In the markets, both the AUD and NZD are down slightly from Friday's closing levels as US Federal Reserve Chairman Jerome Powell is scheduled to speak Wednesday night and is expected to talk down the likelihood of the US employing negative interest rates. Talk of negative rates had weighed on the US Dollar late last week.

The Yen was the biggest mover in the markets dropping nearly 2% against the USD reflecting the news on the interest rate outlook. Japanese authorities are also planning another mega stimulus package which will be financed by more printing of Yen which will further weigh on their currency.

In Australia, the big focus is on Thursday’s employment data, where forecasts expected employment to plunge by 550,000 jobs and the unemployment to jump to 8.3%. Sobering numbers indeed.

While across the Tasman, the big focus remains the Reserve Bank of New Zealand reviewing interest rates on Wednesday at 2.00pm NZST. No change is expected to their official cash rate of +0.25% but they are expected to double the amount of money printing from NZD 30 Billion to NZD 60 Billion. This will give them plenty of capacity to help fund Thursday’s NZ Government budget.

Today on the data front we have Australian business confidence followed by Chinese inflation data.

Global equity markets are mixed across the board - Dow -0.5%, S&P 500 0.0%, FTSE 0.1%, DAX -0.7%, CAC -1.3%, Nikkei 1.1%, Shanghai 0.0%.

Gold prices fell 0.1% to USD$1,698 an ounce, while WTI Crude Oil prices rose 0.8% to US$24.81 per barrel.

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