Weekly Market Recap
Australia
01/06/2020
Week in review
- Australia private new capex for 1Q fell 1.6% q/q
- German business and consumer confidence improve
- U.S. consumer confidence for May rises
Week ahead
- RBA official cash rate
- Australia 1Q20 real GDP
- U.S. labour market report
Thought of the week
The Aussie dollar fell by 18% versus the greenback from the start of this year to the March low. Since then it has recouped a large portion of that depreciation. The short term drivers have been the resilience in demand for iron ore, a relatively lite-QE programme by the Reserve Bank of Australia compared to other central banks and better containment of the COVID-19 virus. Improving market sentiment towards economic recovery means a shift away from safe havens like the USD. However, when it comes to the currency, it is better to focus on the importance of our trading partners and performance against a basket of currencies (AUD REER) which has a high weight to the Chinese Yuan. Too much strength may act as a headwind to fragile re-emergence of economic activity.
Can the AUD keep this up?
REER is real effective exchange rate
Source: Markit, J.P. Morgan Asset Management, all returns in local currency unless otherwise stated.
Equity price levels and returns: Levels are prices and returns represent total returns for stated period.
Bond yields and returns: Yields are yield to maturity for government bonds and yield to worst for corporate bonds. All returns represent total returns. AusBond Comp is the AusBond Composite 0+ Yr, AusBond IG is the AusBond Credit 0+ Yr both provided by Bloomberg.
Currencies: All cross rates are against the Australian dollar. An appreciation of the foreign currency against the Australian dollar would be positive and a depreciation of the foreign currency against the Australian dollar would be negative.
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