The Australian dollar is under pressure as trade war fears simmer

  • The Australian dollar remains under pressure despite renewed weakness in the greenback.
  • Ongoing concerns about a potential trade war erupting between China and the US are weighing on stocks and commodity prices, helping to explain the Aussie’s recent underperformance.
  • The economic calendar is quiet on Monday, suggesting that geopolitics and technicals will continue to dominate movements in Aussie dollar.

The Australian dollar remains under pressure, opening the new trading week just above the 77 cent level despite renewed weakness in the greenback.

Here’s the scoreboard as at 7.45am AEDT.

AUD/USD 0.7702 , 0.0006 , 0.08%
AUD/JPY 80.63 , -0.01 , -0.01%
AUD/CNH 4.8588 , 0.0013 , 0.03%
AUD/EUR 0.6235 , 0.0002 , 0.03%
AUD/GBP 0.5449 , 0.0004 , 0.07%
AUD/NZD 1.0641 , 0.001 , 0.09%
AUD/CAD 0.9917 , -0.0006 , -0.06%

Ray Attrill, Head of FX Strategy at the National Australia Bank, said the Aussie was undermined by steep losses in global stocks, a lift in financial market volatility and large declines in industrial metals prices as a result of continued fears about a potential trade war erupting between the United States and China.

“[The] AUD/USD closed just below 77 cents for the third time this week despite the weak US dollar backdrop that saw USD indices off almost half a percent on the day and over 0.8% on the week,” he said in his morning note.

“The London Metals Exchange index is now 8% off its early February peak and iron ore over 10% off its beginning of March highs which, alongside the Thursday/Friday stock market falls and related jump in the VIX volatility measure, account for the slippage and are suggestive of more weakness to come, at least on the crosses even if a weak USD holds up the AUD/USD rate.”

Attrill said “a fair amount of damage was done on Thursday night and Friday morning after the US went ahead and announced plans for tariffs on $60 billion worth of Chinese imports and China announced retaliatory actions to the steel/aluminium tariffs against some $3 billion of US exports to China”.

That contributed to the AUD/USD falling to as low as .7685 on Friday before eventually closing at .7696.

AUD/USD Hourly Chart

With little in the way of major data and events scheduled on Monday, Attrill says news and speculation relating trade tensions and geopolitics will likely dictate movements in the Aussie today.

New Zealand trade data for February, along with German import prices and the Chicago Fed National Activity Index in the US, are the headline acts for the session.

The US will also hold a series of short-dated treasury auctions while Bill Dudley and Loretta Mester of the US Fed are also scheduled to deliver speeches.