RBA deputy governor, Debelle: Coronavirus causing large increase in risk aversion, uncertainty

Ross J Burland FXStreet

The Reserve Bank of Australia deputy governor, Debelle, says coronavirus causing large increase in risk aversion, uncertainty.

Key statements

Says lower interest rates to help offset demand shock from virus.
Says recent fall in a$ will provide a helpful boost to economy.
Says government stimulus package will provide welcome support to economy.
Combined fiscal and monetary policy will help navigate a difficult period.
Says the effect of the virus will come to an end at some point.
Repeats impact of virus on tourism, education to take 0.5ppt from Q1 GDP.
Says too uncertain to assess impact of the virus beyond march quarter.
Australian banking system well capitalised, in a strong liquidity position.
Have not seen any particular sign of pressure in our daily market operations.
Liaison indicates no material disruption to exports of iron ore and coal at this stage.
Says global economy will be materially weaker in Q1 and period ahead.
China very focused on getting its economy back to full output.
Monetary policy still works.
Impact of exchange rate clearly still works.
There are scenarios where we would have to consider QE.
Would consider forward guidance and keeping bond yields down.
Would aim to keep yields low rather than set a target for bond buying.
Not a lot of stress in money market at present.

FX implications

AUD/USD has been on the backfoot since yesterday's disappointment in the NAB Business Survey and while the US dollar has taken back to the top spot n the FX board. There is nothing in here pertaining to immediate drastic measures but the market is pricing in around a 100% chance of a 25bp cut at the next RBA meeting on 7 April which is likely to continue to weigh on AUD.

AUD/USD: Under pressure around 0.6500 amid broad US dollar strength

Author

Ross J Burland

FXStreet

Ross J Burland, born in England, UK, is a sportsman at heart. He played Rugby and Judo for his county, Kent and the South East of England Rugby team.

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