Signs that the spread of coronavirus is gathering pace and dwindling US stimulus hopes have dented sentiment today, with major US stock markets opening up more than 1% lower. While some of the losses have been clawed back on news President Trump is willing to look beyond the current $1.8 trillion package, markets are in gloomy mood.

The Vix index – the so-called Wall Street ‘fear gauge’ – has jumped up above 28 and is much higher than its long-term average around 20. With market sentiment wilting, the Dollar is trading broadly higher with higher beta currencies taking a pounding.  The release of the weekly US initial jobless claims has also not helped the mood, with the print of 895k claims coming in well above the 825k estimate. The figures may be distorted by a processing backlog in California, but the uptick is certainly disconcerting in the current environment.

PM Johnson will officially decide tomorrow whether the UK will remain at the Brexit negotiating table. The bar for walking away seems very high at the moment, particularly with clear downside risks to the domestic economy from imminent new lockdown measures. There is pressure on France by Germany to soften its demands on fisheries and accept a deal, but the choppy nature of sterling this week is likely to continue as headline havoc continues.

Potential November rate cut hurting AUD

Higher beta currencies are struggling today and overnight dovish comments by RBA Governor Lowe have added to the Aussie’s pain. He said the bank could cut rates to 0.1% and leave them at lower levels for longer. This cautious stance outweighed the better-than-expected jobs report, which saw the unemployment rate stay below 7%.

AUD/USD has sliced through the 100-day Moving Average today at 0.7091 and a strong close below here may see prices test the September low just above 0.70. However, the pair was supported by the 100-day MA back then so the close is crucial.