AUD/USD Drops After RBA Trims 2020 Growth Forecast; China Data Pending By

© Reuters.

By Alex Ho – The Australian dollar fell against its U.S. counterpart after the Reserve Bank of Australia (RBA) cut its 2020 growth forecasts amid the outbreak of the coronavirus and the recent bushfires.

The pair lost 0.2% to 0.6716 by 11:59 AM ET (03:59 GMT).

In the Statement on Monetary Policy release on Friday morning, the RBA slashed the June 2020 GDP growth forecast to 1.9% from 2.6% previously, while the December forecast was trimmed to 2.7% from 2.8%. Looking further ahead, it raised both the June and December 2021 forecasts to 3.1% from 3.0%.

Meanwhile, the was little changed at 98.340 as traders awaited a key jobs report due later in the day.

Citing Judd Deere, a White House spokesman, Reuters reported that U.S. President Donald Trump had a conversation with Chinese President Xi Jinping on Thursday. The two leaders “agreed to continue extensive communication and cooperation between both sides.”

They also reaffirmed their commitment to implementing Phase 1 of the trade deal between the U.S and China, according to Deere.

Yesterday, China said it would halve tariffs on $75 billion of U.S. imports as part of its efforts to comply with the phase one agreement that was ratified in Washington last month.

The pair gained 0.2% to 6.9789. China’s trade numbers for January are due anytime, with economists expecting a drop in both exports and imports due to the timing of the Lunar New Year break this year.

In other news, the People’s Bank of China said it is closely monitoring the economic impact of the virus outbreak, but the central bank has many policy tools to offset the pressure.

Vice Governor Pan Gongsheng told a news briefing on Friday that China’s economy could be disrupted in the first quarter, but is expected to recover once the virus is brought under control.

The new virus has so far claimed 636 lives. There were 3,143 new cases confirmed on Thursday, bringing the total so far to 31,161.

The pair was unchanged at 1.0981 as European Central Bank Governor Christine Lagarde reinforced expectations that the central bank’s ultra-loose monetary measures will remain in place at least until the year.

“Moderate growth performance is delaying the pass-through from wage increases to prices and inflation developments remain subdued,” Largarde said. “The euro area economy therefore continues to require support from our monetary policy.”

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