AUD pummeled as US on track to implement aggressive tariff program

Daily Currency Update

There is ample to digest this morning with the AUD plunging back below US$0.63 as tariff headlines again dominate direction. After yesterday suggesting a 25% tariff on Canada and Mexico would be postponed into April, President Trump reversed course announcing all was on track for the tariffs to be implemented on March 4. At the same time, Trump announced plans to impose an additional 10% tax on Chinese imports propelling the USD back toward 7.30 against the CNH. The 10% uptick in Chinese tariffs takes the overall tax on Chinese imports to 34.5%, a 20% increase over the life of the new administration. The AUD had tracked sideways through most of the domestic and European session before giving up over 1% and sliding back below US$0.6250 as markets absorbed Trumps comments. The move illustrates just how vulnerable the AUD is to global risk sentiment and the implications of an all-out tariff war. If we continue to see trade conditions deteriorate and tensions escalate, a break below US$0.60 is still plausible. As the market continues to hold out hopes tariffs will be delayed, postponed or forgiven, the Australian Financial Review is reporting Australia has been unsuccessful in negotiating an exemption on steel and aluminum tariffs.

Our attentions remain affixed to US trade policy and Chinese response while Tokyo CPI data, EU inflation numbers and the Fed PCE inflation index offer macroeconomic guidance through Friday.