Market Update - 28th May 2020 - AUD/USD Moves Higher With Positive Market Sentiment

Stocks keep ripping higher:

Over the past two months, the ASX has gone from being down 40% to up 32% in what could only be called the most spectacular turnaround of our life times, and the rally looks set to continue with another surge in equity prices overnight. Both U.S and European stocks finished positive with the Dow up 500 points or 2.21%, while in Europe the Spanish IBEX was the best performer up nearly 2.5%. In the same period AUD/USD has surged a whopping 1,100 points or 11 cents from March 19 lows. AUD/USD is now only 1 cent off pre-corona levels. Which suggests to me the rally could be near an end - for the time being.

Hedging: 

As importers, we need to be cognisant of the fact that markets are irrational & volatile and while the past two months has seen a spectacular recovery, the next one or two could see a shift in sentiment and a lower AUD. While my view remains bullish for the AUD, due to our competent handling of the pandemic and now opening of the economy, the AUD is not immune from further market wide sell-offs.

Some of my importer clients have been hedging above 0.6400 and I commend that for that.

Final message: It hurts alot more to watch AUD drop back to the 50's without any Forward Cover in the 60's than it does to watch it climb to 70's with a bit of Forward cover in the 60's. Opportunity cost vs. losing money on an import.

AUD EXCHANGE RATES:

AUD/USD – 0.6585

AUD/GBP – 0.5364

AUD/EUR – 0.5959

AUD/NZD – 1.0664

AUD/JPY – 71.000

OTHER MARKETS:

All Ords (XAO) – 5,608

Gold – A$2,583/oz

Silver – A$26.03/oz

Oil – US$32.44 barrel

DATA RELEASES TODAY:

AUD - Private Capital Expenditure q/q at 11.30am

USD - Prelim GDP q/q at 10.30pm

Senior FX Manager

Compass Markets

Contact Patrick for a quote on 0431 278 632.

*Above rates are indicative wholesale rates and intended as a guide only. Commentary above is my opinion and should not be construed as financial advice. I recommend you seek professional advice before doing anything of a financial nature.