AUD unlikely to be able to record sustainable gains as long as Coronavirus threatens market sentiments, says Commerzbank

The Australian dollar is not expected to be able to record sustainable gains as long as the corona virus is putting pressure on market sentiment in general, and in particular in Asia, according to the latest research report from Commerzbank.

The Reserve Bank of Australia (RBA) seems completely fine with the current “very low level” of interest rates. Of course it sees risks in the trade dispute between the US and China and in the outbreak of the virus for global growth.

Bush fires and virus epidemics will only put short term pressure on domestic growth though according to the RBA. The rate cuts last year support employment, wage growth and inflation sufficiently, the report added.

The RBA now wants to wait for future developments both domestically and globally. Of course it is prepared to cut the key rate further if that should become necessary; but it does not see any reason for that now.

That did surprise a number of market participants so that the AUD was able to appreciate significantly and to move away from its lows against the USD, Commerzbank further noted in the report.