AUD edged lower despite controversial US policy announcements

Daily Currency Update

The Australian dollar tracked lower through trade on Monday amid a broad upswing in the US dollar. White House commentary and policy announcements continue to dominate direction, with President Trump again in the headlines. Trump announced considerations to allow Nvidia and AMD to sell more advanced processors into China; however, a 15% tax would be applied to all exports as part of a new export licence scheme.

The policy announcement suggests a deeper pivot toward a program of State Capitalism as Trump and the Republicans exert more control over the economy. The prospect of tariffs on imports and a tax on exports is a concerning development and should have been enough to drive the dollar lower. Instead, the market seems content to adopt a view that more US exports to China are a good thing, even if the government is planning to take a cut.

The AUD drifted toward session lows just above US$0.65, finding support through the latter half of the overnight session and edging back toward US$0.6515.

Our attention turns now to the RBA’s policy meeting. The market has fully priced a 25-basis-point cut of the Cash Rate from 3.85% to 3.6%. We are keenly attuned to any changes in RBA inflation and growth forecasts and signals surrounding future policy direction. We expect Governor Bullock will be wary of offering any hints that back-to-back rate cuts are a possibility, and as such, may adopt a more hawkish tone, adding some support to the AUD.

All in, we expect today’s announcement to have little impact on near-term AUD value, and we should continue to track between US$0.64 and US$0.66.