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Currency Market Analysis

Feb 24, 2020 | Currency Market Analysis

Global Themes

Dow, greenback reverse as slowdown hits US; Aussie opens weaker

• USD hit as services PMI plunges
• Aussie opens weaker on new virus fears
• German confidence key

US slowdown?

The non-stop run in US shares and the greenback turned abruptly on Friday after a shock drop in US economic activity unsettled market confidence.

US manufacturing PMI produced a shock result of 50.8 (versus the 51.5 expected) while the services index fell into contraction at 49.4 (versus the 53.3 expected).

The US purchasing managers index, a key measure of activity and sentiment, has held up well over the last year as the rest of the world struggled.

Friday’s miss sparked fears that the US might have succumbed to the world’s worrying economic slump.

Aussie opens lower

The turn in the greenback helped the AUDUSD rebound from 11-year lows.

The AUDUSD ended 0.2% higher on Friday.

However, a jump in coronavirus cases over the weekend, especially in South Korea and Italy, pressured the AUD in early Monday trade.

On Friday, the Aussie was lower in other markets with the AUDEUR down 0.4% and the AUDJPY down 0.3%.

The losses continued on Monday.

Confidence counts

The early focus today will be the reaction to New Zealand retail sales this morning.

The AUDNZD was moderately higher after a fall from 1.6% in the September quarter to 0.7% in the December quarter.

Tonight, German business conditions and sentiment will be closely watched.

On Wednesday, US consumer confidence will be key after Friday’s poor PMI numbers.

Thursday’s Australian capital expenditure numbers will be the first component ahead of next week’s December-quarter GDP.

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