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Australian dollar hit as global growth concerns rise

The Australian and New Zealand dollars were hit by global growth concerns, while bonds extended their rally, driving yields to new lows.

The Australian dollar took a hit on Monday as global growth concerns were on the rise.

Bonds extended their rally, driving yields to all-time lows.

Australian dollar price

The Australian dollar took a hit on Monday at $0.7075 at time of writing, falling after last week’s top at $0.7168.

The New Zealand dollar was also struggling to keep recent highs of $0.6938, dropping to $0.6875.

Yields on 10-year Australian bonds have dived almost 20 basis points in the past seven days, hitting record lows at 1.77%, while. New Zealand's 10-year bonds dropped to 2.008 %.

Markets showed clear signs of pricing in a rate cut form the Reserve Bank of Australia (RBA), after its decision to leave the cash rate unchanged at 1.50% last week.

Weak European data

Poor manufacturing data from Europe and across the globe last week, weighed on risk sentiment and prices for industrial commodities.

IG market analyst, Kyle Rodda says the manufacturing PMI in Europe has dropped well into “contractionary” territory.

‘Most troubling, is that the core of this is apparently being driven by weakness in Europe’s power-house economy, Germany. Remembering 50 is a neutral print when it come to PMI data: German Manufacturing PMI printed a woeful 44.7.’Mr. Rodda said.

Poor economic data globally also saw inflation expectations crash adding pressure on the longer-end of the yield curve.

US Stocks

The yield on US 10-year Treasuries, was 1 basis point lower at 2.432%, while the yield on the equivalent Japanese note was off 2bp, at minus 0.087% , its lowest since September 2016.

The fall comes after US stocks dropped to their lowest since early January on Friday.

IG market analyst Kyle Rodda says economic health on a global scale is worsening. ‘The world economy’s health is looking worse than previously imagined, and the re-introduction of dovish rhetoric from global central bankers is proving an inadequate remedy.’ Mr. Rodda said.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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