AUD/NZD sitting tight on 1.04 handle, awaiting coronavirus updates

• AUD/NZD holding tight ahead of the next round of coronavirus updates.
• RBNZ and RBA outlooks on coronavirus relatively the same, although RBNZ more optimistic on the economic outlook.

AUD/NZD has been in consolidation leading into Asia today, trading with modest downside tendencies as traders looking ahead to the nex key data from Australia next week while mulling the latest coronavirus updates in a risk-off market setting. At the time of writing, AUD/NZD is trading at 1.0431, sat between 1.0429 and 1.0438. 

It's all ears for the next round of the coronavirus figures from China today following yesterday's nearly 50k new coronavirus cases in Hubei province, which was a surge of 45% amid new image scans, that weighed heavily on market sentiment, resulting in a risk-off tone on Wall Street. 

The Hubei province reported yesterday that there were 242 new deaths and 14,840 new cases of the flu-like virus taking the worldwide death toll to at least 1,357 and the number of confirmed cases to more than 60,000. However, the high numbers were driven by a change in the way the disease is being diagnosed. This may mean that today's releases will be far less so a calm into the close for the week.

RBA outlook on coronavirus

Casting minds back, Reserve Bank of Australia's governor, Philip Lowe, warned that China’s economy is now bigger and more integrated into the world economy, so the impact is likely to be greater when he was appearing before the House of Representatives economics committee in Canberra last Friday. He said the virus was spreading “extraordinarily fast”. However, he also said the response of Chinese authorities in stopping people moving around China was also greater than during the Sars epidemic.

When talking about Sars, he argued that “It took a hit of 2% in one quarter but bounced back quickly. Growth now is slower and the capacity to bounce back and have stimulus measures isn’t as great.” He agreed with the committee chair, Liberal MP Tim Wilson, that coronavirus was likely to have a greater impact on the Australian economy than Sars. Such sentiment is a weight on the AUD. 

RBNZ outlook on coronavirus

As for the NZD, the Reserve Bank fo Newzealand was cautiously optimistic about the coronavirus. The RBNZ said the overall impact of coronavirus on New Zealand will be of short duration. However, there was also an air of optimism over the economy and a hawkish tilt beyond, rates needing to. Moreover, the RBNZ said that there is no chance of a rate cut in 2020 and gave the following hawkish projections:

• RBNZ sees TWI NZD at around 72.2% in March 2021 (pvs 71.5%).
• RBNZ sees the official cash rate at 1.03% in March 2021 (pvs 0.9%).
• RBNZ sees the official cash rate at 1.01% in June 2020 (pvs 0.9%).
• RBNZ sees official cash rate at 1.1% in June 2021 (pvs 0.94%).

The week ahead

AU labour market data will be closely watched for the justification of RBA policy guidance and validation of their positive future growth assessment.

AUD/NZD levels