AUD continues upswing as US dollar slide continues
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Daily Currency Update
The Australian dollar edged higher Wednesday, testing a break above US$0.6390. US equities fell as tariff headlines forced investors to continue divesting of US assets. Nvidia led the losses across the IT sector after the White House imposed a restriction on the export of their H20 chip to China, prompting an 8% collapse in its share price, driving losses across the S&P 500 and Nasdaq. US treasury yields fell and the US dollar followed suit, allowing the AUD to mark intraday highs at US$0.6391 before a Bloomberg report hinted China was open to trade talks. Chinese officials noted they were willing to come to the table if the White House showed more respect and willingness to address China trade war concerns. The AUD faded through the back end of the overnight session, drifting back below US$0.6350 before settling nearer US$0.6365.Our attentions turn now to domestic unemployment data. With the unemployment rate expected to tick up to 4.2% and jobs growth slowed, a softer read could all but guarantee the RBA cuts rates by 50 basis points next month. Offshore, we look to the European Central Bank (ECB). Another 25-basis point rate cut has been priced in and will likely do little to slow the euro’s recent momentum. With second-tier data on the US docket, tariff headlines remain front and centre leading into the Easter long weekend.
Note: Our daily commentary will return after the Easter break on Tuesday 22 April.
Key Movers
The US dollar was on the back foot again amid further escalation in the tit-for-tat trade war with China. US equities stumbled, led by losses across tech stocks. Nvidia plunged 8% and announced a 5.5billion dollar Q1 write down after the White House blocked exports of its H20 chip to China. The S&P 500 fell a further 2.2% on the day as investors exit US assets in search of alternate safe haven corridors. The USD DXY index is down near 1% as the euro led gains among major currencies, back up near 1.14, having marked intraday highs at 1.1399. In contrast, the pound enjoyed limited upside after CPI inflation data printed softer than expected, cementing calls for a further 4 25 point rate cuts through year-end.As we look now to the Easter long weekend, tariff headlines continue to dominate direction. The sustained escalation in trade tensions continues to elevate fears for US recession. Even a softening in Trump's tariff program will do little to avoid a dramatic slowdown in US economic activity, while a sustained hard lined approach could trigger a 1930s style depression. We expect volatility will remain elevated and at untenable levels until a clearer trade picture emerges. In macro news, the ECB is expected to cut rates when it meets this evening.
Expected Ranges
- AUD/USD: 0.6280 - 0.6420 ▲
- AUD/EUR: 0.5520 - 0.5620 ▼
- GBP/AUD: 2.0600 - 2.1000 ▼
- AUD/NZD: 1.0700 - 1.0800 ▼
- AUD/CAD: 0.8780 - 0.8920 ▼