The carnage in AUD/USD continued in early trading on Wednesday, with the pair falling to lows last seen in March of 2009. The move took place as fears set in over the impact of the coronavirus on the global economy.
Coronavirus continues to spread across the world at an alarming rate. At the World Health Organization (WHO) headquarters in Geneva, Bruce Aylward told reporters that countries outside China are “simply not ready” for a pandemic. He added, "You have to be ready to manage this at a larger scale... and it has to be done fast." Meanwhile, Anne Schuchat, MD, principal deputy director of the Centers for Disease Control and Prevention (CDC), told reporters at a news briefing: “Current global circumstances suggest it’s likely this virus will cause a pandemic.” She also stated; "It's not so much a question of if this will happen any more, but rather more a question of when this will happen." To date there have reportedly been 81,259 cases of coronavirus infections and 2,770 deaths globally.
The Australian dollar has been particularly hard hit due to its close economic ties to China, it’s largest trading partner. On Tuesday, Treasurer of Australia Josh Frydenberg warned coronavirus will have a greater impact on Australia’s economy than the summer bushfires. Speaking on Sunrise, an Australian breakfast show program, he said: “This is going to have a very significant impact on the Australian economy.”
The Reserve Bank of Australia (RBA) cut interest rates three times in 2019 to a record low of 0.75%. Earlier in February the RBA kept rates steady and said a “soft patch in growth is likely to extend into early 2020 because of the ongoing drought, the effects of the bushfires, and the effects on Australian exports of the recent outbreak of a new coronavirus in China.” Economists increasingly expect that the RBA may cut interest rate as early as next Tuesday March 3rd or in April to address the economic consequences of the coronavirus outbreak.
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