AUD falters as trade tensions with China escalate

Daily Currency Update

AUD - Australian DollarThe Australian dollar enjoyed a roller coaster like run through trade on Tuesday, bouncing between intraday day highs at 0.6535 and session lows at 0.6430. Reports of escalating trade tensions between Australia and China continued as China appears to have banned the export of meat from four large scale Australian abattoirs, a move that comes on the back of suggestions they will impose an 80% tariff on Australian Barley under claims Australian exporters had deliberately lowered prices to undercut local growers. Fears of a trade tiff with our biggest trading partner has added to the heightened sense of uncertainty currently plaguing markets, forcing the AUD lower while weighing on any upturn toward resistance in the short term. Having touched intraday lows at 0.6430 the AUD rebounded recouping the losses suffered through the domestic session as investors looked to correct USD positions ahead of today's speech from Fed Chair Jerome Powell. Investors have recently entertained the likelihood of negative US interest rates and with the Fed staunchly against such measures in the past Powell’s commentary will offer invaluable insight into any shift in Fed and FOMC thinking. Touching highs at 0.6535 the AUD has shifted lower into this morning’s open and currently buys 0.6475 US cents. Attentions today turn to the Quarterly wage price index and Westpac consumer sentiment. We expect a steep decline in consumer sentiment while the wage price index will likely offer little to influence direction given it provides a backward look at Q1 and will offer little insight into the impacts of COVID-19 on earnings power. Instead, Powell’s commentary and risk demand will steer direction through midweek trade.