On Wednesday, bad news hit the Euro and the Aussie, together with the return of the risk aversion, the dollar once rebounded to 100.43.
Rating agency Standard & Poor’s announced this morning that the outlook for Australia’s sovereign credit rating was lowered from stable to negative, but the rating remained at the highest level AAA. The Aussie fell by nearly 50 pips in the short-term in early trading session, and now the AUD/USD is currently trading at around 0.6130-0.6140.
S&P expects that the new coronavirus pandemic will severely hit the economy, expected to contract by 1.3% in 2020, causing Australia falling into a recession for the first time in nearly 30 years. Tax reduction and the stimulus measures will increase the deficit of the Australian government, which is expected to account for 7.5% of the GDP in 2020-2021. However, S&P also said that the large-scale of the fiscal deficit may be just temporary, and the economy is expected to recover next year.
At the end of the Asian session, the Euro sharply declined nearly 50 pips, reached the day low 1.0828. It is reported that the EU finance minister failed to reach an agreement on bailout measures to deal with the current global pandemic. GBP/USD, oil prices and the stock markets are also under pressure.
The EU discussed for up to 16 hours in a video emergency meeting, but the finance ministers of various countries did not reach consensus on the stimulus plan. It is reported that the scale of the plan is nearly 500 billion euros, but the EU members are very divided. Investors worried that it would be even more difficult for the EU to shake off the recession caused by the pandemic.
Overall, the market sentiment was more cautious on Wednesday, and the dollar was boosted up slightly. The number of confirmed cases and deaths around the world continues to increase. Investors must still pay attention to the fact of the global economic recession.
Furthermore, because the United States has no intention to lower production, the market now is doubtful whether the OPEC+ can still reach any agreement on production cut, making oil prices unstable. In addition, the FOMC meeting minutes will be announced in the early hours of Thursday, causing higher uncertainty in the market.
During the European session on Wednesday, the US stock index futures were just ranging, reflecting the cautious attitude of investors.