It was the absolute whipping boy of the crisis. Now it’s the superstar of the markets rebound. Is the AUD now a safe haven of the Coronavirus crisis? On the agenda, we discuss the rebound and and the drivers of AUD to investigate further.
Join Nucleus Wealth’s Head of Investments Damien Klassen, Chief Strategist David Llewellyn-Smith, and Head of Operations Tim Fuller as they cover “IS AUD a Coronavirus safe haven?”.
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Drivers covered included:
1. global and Australian growth (or, more recently, Chinese growth and Australia’s terms of trade);
- On this front Global growth has been crushed by a weak rebound.
- Chinese recovery leading but to struggle and weaken medium term.
- Coal price is getting belted.
- Iron ore likely to slide lower on:
- There’s a weak chinese property pipeline coming into australia.
- When we add education and tourism falls, the trade deficit will likely turn negative.
2. interest rate differentials;
- Australian rates low forever now.
- QE is massive in US and tiny in Australia.
- Spread has turned positive but not aggressively so.
3. investor sentiment and technicals
4. the relative strength of the US dollar.
- Safe haven played out as expected.
- Swiftness of policy response prevented super-spike.
- But USD still in demand.
We’ll conclude by discussing the investment implications of this going forward
Tim Fuller is Head of Operations at Nucleus Wealth.