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10Y Vol Sales

EURO-AUSSIE: Westpac note that "despite the sharp improvement in global risk
appetite over the past 3 months, including record highs for global equities, A$
has underperformed EUR. This probably largely reflects another step lower in
AUD's yield pickup over EUR, as a poor Q3 GDP report was followed by the
devastating bushfires. This reinforced exp. for further RBA easing in '20, at a
time when most central banks were seen as either firmly on hold (incl. the ECB)
or somewhat less likely to ease again. But the next few weeks are likely to see
some AUD recovery. Australia's strong Nov & Dec jobs reports should be seized on
by the RBA Board at its Feb meeting as support for its rather upbeat growth
view, justifying a steady hand. This removes one of the key threats to AUD since
Q3 GDP. The global growth pulse is also more positive, with PMIs bouncing & the
U.S.-China trade deal providing a period of stability, though of course the
Wuhan virus is a wildcard for markets near term. ECB president Lagarde says the
risks to EZ growth are "less pronounced" but QE is set to continue until at
least Q4 '20, limiting euro rallies. We look for EUR/AUD to grind back towards
A$1.6030 by March. However A$ underperformance is likely to resume from Q2."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |