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In a research announcement, Moody’s Investors Service says that Australia’s policy responses to the coronavirus outbreak have provided fiscal stimulus to the economy and improved financial stability in the banking system and in particular banks’ funding and liquidity positions. 

Lead paragraphs

“The government’s policy response will help ensure investor confidence in banks in Australia, which is crucial for the biggest banks that rely on global wholesale credit markets for their funding requirements,” says Frank Mirenzi, a Moody’s Vice President and Senior Credit Officer.

Australia’s measures to support its economy during the outbreak include cash handouts to households and businesses, and an associated program for government bond purchases by the Reserve Bank of Australia (RBA). These measures have spurred monthly growth in deposits in the banking system of 5.2% in March and 2.4% in April, compared to the 0.8% monthly average for the 12 months to March 2020.

Market implications

AUD/USD rallies to new 2020 high on dovish Fed

As noted in the above article, markets expect that policy could be in place for the foreseeable future. It is assumed that yield curve control, or YCC, will be removed before the cash rate is hiked. Analysts at Westpac have argued: 

Australia’s outperformance in coronavirus containment should play in its favour but the Aussie does seem stretched around recent levels.

If the Aussie is overstretched, then the following article could be useful:

S&P 500: Futures heading to test a critical daily candle, if it breaks, a 61.8% retracement will be earmarked, and much more

 

 

 

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