Australian Dollar Soars Versus the Pound on Chinese New

The Australian dollar fell against the US dollar on Tuesday afternoon as the threat of a virus outbreak across Asian region saw the Aussie fall out of favour, though concerns about politics in Washington DC capped gains in the US currency.

AUD/USD was lower by 8 pips (-0.10%) to 0.6868 with a daily price range of 0.686 to 0.689 as of 3pm GMT, with the currency pair just off its 2020 lows.

The US dollar

The virus outbreak in China diverted attention away from the first day of the Economic Forum in Davos, Switzerland as well as the beginning of the impeachment trial in Washington DC. US President Trump opted to give a speech at Davos instead of staying home in the US for the first day of hearings. So far, the dollar has not reacted strongly to impeachment proceedings but appeared to show signs of weakness on Tuesday as we draw closer to the main event. It is still widely expected that Senate Republicans will throw out the impeachment charges and not convict the President.

The Redbook index and T-bill auctions are the only items on the US economic calendar on Tuesday.

The Australian dollar

The Australian dollar was one of the many assets across Asia that fell on Tuesday as investors positioned for a potentially disastrous virus outbreak in the region. Chinese Authorities have stated that the coronavirus is contained but if it isn’t we might expect further weakness in the Australian dollar and a greater flight into haven assets like the Japanese yen and gold. If the virus proves to be as deadly or easy to spreads as SARS, risk sentiment in markets would likely be much reduced.

The outbreak was first detected, and is thought to have started in Wuhan, China and people from the city now face extra screening before travelling as authorities take precaution against the spread of the disease. There are more than 200 cases of the disease, which includes other Asian counties in including South Korea, Japan and Thailand.

Later Tuesday Australia release Westpac Consumer sentiment data, where confidence is in line to fall for a fourth straight month.


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