The Australian Dollar found its feet on Friday, forcing its way above 0.72. The Pair built on the momentum from Thursday to recover from a 30-month low but petered out towards the 0.7230 level. Sentiment ultimately shifted however after US President Trump put the brakes on market optimism, stating that he was indeed willing to put into effect another round of Tariffs despite Secretary Mnuchins’ re-opening of trade talks. Opening this morning at 0.7151, the Aussie continues to feel the effect of the US-China trade tensions.
Exacerbating the trade tensions was several media reports that Trump intended to proceed with $200bn tariffs on Chinese imports. Trump mentioned he was unconcerned with the re-opening of discussions and would indeed press ahead with the tariffs. Over the weekend, the Wall Street Journal also mentioned that Trump may lower the tariff to 10% from the originally proposed 25%, a potentially “better” outcome than expected for the Aussie.
Amidst the trade war discussions was a strengthening Greenback with mostly positive data releases for the week. Chicago Fed President Evans, noted that the US economy was “firing all cylinders” and said it would be “quite normal and consistent” should the Fed take its cash rate above neutral over the medium term. In Australia, things appeared to be quite rosy as well, with 44,000 jobs added to the economy, as reported on Thursday. The initial jump led to movement around the 0.72 level but the good news story was gradually unwound as Chinese data came in a mixed bag. Chinese retail sales remain strong but fixed asset investment continued to decline, undermining the Aussie’s gains.
To start the week the Australian Dollar maintains its focus on the on-going trade war. Domestically, the AUD looks to the RBA’s monetary policy minutes for direction.