The Australian dollar was higher against the US dollar on Thursday amid a broad pullback in the greenback despite a smaller than expected drop in durable goods orders and fourth quarter US GDP growth that met expectations. An unexplained coronavirus case in California has investors worried a bigger spread could pull the world’s biggest economy into a recession.
AUD/USD was higher by 34 pips (+0.53%) to 0.6578 with a daily price range of 0.6543 to 0.6592 as of 3.30pm GMT. The currency pair made steady gains across the day to recover from the 11-year lows made on Wednesday. The currency pair is still down -0.78% on the week.
The Aussie was able to break its correlation to global stock indies on Thursday. The Dow Jones Industrial average was down 700 points at the time of writing but nonetheless the Australian currency was higher on the day.
Australian PM Morrison said the coronavirus in his country is likely to turn into a pandemic but said the government would not introduce a large fiscal stimulus programme to combat it. A coronavirus pandemic without a fiscal boost may mean the Reserve Bank of Australia (RBA) must do the heavy lifting for the Australian economy by lowering interest rates.
The USD moving lower alongside US equities
The US dollar is coming off this week’s highs as focus switches to the United States and its readiness for a possible coronavirus outbreak. US markets have been under pressure all week, but it has intensified since a press conference from US President failed to offer any concrete solutions. The President asked for a multi-billion spending package to fight the disease earlier in the week.
US economic data mostly bettered expectations on Thursday but sentiment around COVID-19 was dominating price action. US GDP for the fourth quarter rose 2.1% as expected. Durable goods orders in January fell only -0.2% when a much bigger drop of -1.5% had been expected but the hit to the US economy from the coronavirus only appears to have materialised since February.
