The Australian dollar is weaker as fears over Italy are replaced by trade war concerns

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  • The Australian dollar finished marginally lower on Thursday as an easing in political concerns over Italy was overridden by renewed fears over a global trade war.
  • The US will introduce tariffs on steel and aluminium imports from major trade partners starting today.
  • It is a busy economic calendar today, headlined by the release of US non-farm payrolls for May.

The Australian dollar finished marginally lower on Thursday as an easing in political concerns over Italy was overridden by renewed fears over a global trade war.

Here’s the Aussie dollar scoreboard as at 7am in Sydney.

AUD/USD 0.7567 , -0.0008 , -0.11%
AUD/JPY 82.34 , -0.15 , -0.18%
AUD/CNH 4.8486 , 0.0008 , 0.02%
AUD/EUR 0.6471 , -0.0023 , -0.35%
AUD/GBP 0.5691 , -0.0007 , -0.12%
AUD/NZD 1.0807 , -0.0028 , -0.26%
AUD/CAD 0.9797 , 0.0047 , 0.48%

As David de Garis, Economist at the National Australia Bank explains, the session was defined by a shift in investor concerns from Italian politics to global trade.

“A new Italian coalition government between the Five Star and the League is now done, Prime Minister designate Conte proposing and announcing an alternative candidate for Finance Minister, Giovanni Tria,” he said.

“Both parties are intimating that there are no plans to leave the Euro or exit the EU, calming market nerves at, least for now.”

However, that was offset by news that the US will introduce tariffs on steel and aluminium imports from major trade partners starting today.

“US Commerce Secretary Wilbur Ross announced that the 25% steel and 10% aluminium tariffs on the EU, Mexico and Canada would re-apply from July 1,” de Garis said.

“Ross blamed not enough progress in dealing with the EU on trade issues and a lack of progress in re-writing NAFTA.”

That overrode the positive headlines out of Italy, along with what was a strong batch of economic data from both the United States and Europe released during the session.

The wash up was that the Aussie dollar fell modestly against the greenback and most major crosses except the Canadian dollar.

AUD/USD Hourly Chart

Turning to the day ahead, most focus — aside from the geopolitical headlines relating to trade — will be on the release of US non-farm payrolls data for May at 10.30pm AEST.

Markets are looking for an increase in payrolls of 188,000, according to economist forecasts offered to Reuters, leaving the unemployment rate steady at 3.9%.

Average hourly earnings — undoubtedly as important as the headline payrolls as unemployment figures given its implications for inflationary pressures — is expected to lift by 0.2% leaving the change on a year earlier at 2.7%, up from 2.6% in April.

Before that data hits, markets will receive manufacturing PMI and house prices data in Australia, CPI, trade and GDP data from South Korea along with manufacturing PMI figures from Japan, China, India, Europe, Canada and the United States.

On the central bank front, FOMC members Kaplan and Kashkari will also speak during the session.

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