The Australian dollar remains under pressure as trade war speculation swirls

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  • The Australian dollar has opened the new trading week mixed against the major crosses.
  • The National Australia Bank says an escalation in trade tensions between the US and other major nations is not good news for the Australian dollar.
  • Markets will receive a raft of services PMI reports today along with Australian building approvals and ANZ job ads.

The Australian dollar has opened the new trading week mixed, rising modestly against the US dollar but losing ground against most of the major crosses.

Here’s the scoreboard as at 7.35am AEDT.

AUD/USD 0.7766 , 0.0004 , 0.05%
AUD/JPY 82.00 , -0.11 , -0.13%
AUD/CNH 4.9134 , 0.0019 , 0.04%
AUD/EUR 0.6288 , -0.001 , -0.16%
AUD/GBP 0.5623 , -0.0006 , -0.11%
AUD/NZD 1.0718 , -0.0012 , -0.11%
AUD/CAD 0.9999 , 0.0001 , 0.01%

Rodrigo Catril, Currency Strategist at the National Australia Bank (NAB), says the mixed performance reflects the view that heightened trade tensions will not benefit the commodity-linked Australian dollar over the longer-term.

“For currencies, the initial reaction to US led trade tensions is a negative for the USD, but we think that an escalation of these tensions will result in a differentiation between safe haven currencies and currencies from small open economies,” he says.

“AUD, CAD and NZD, as well as emerging market currencies, are unlikely to be winners under such scenario.”

Catril adds that “a full-scale trade war is not good for global growth and risk sentiment,” contributing to the Aussie’s underperformance against the euro and yen on Friday.

However, as seen in the hourly chart below, the AUD/USD range-traded during the session, falling to as low as .7738 before crawling higher into the close as US stocks recovered.

AUD/USD Hourly Chart

Turning to the session ahead, there’s a raft of economic data released both in Australia and abroad.

Domestically, markets will receive Ai Group’s Performance of Services Indicator (PSI) for February at 8.30pm AEDT.

That will be followed three hours later by the release of Australia’s official building approvals report for January, ANZ’s monthly job ads report for February along with company profits and business inventories for the December quarter of last year.

Most interest will likely fall on the building approvals release given they plunged by 20% in December.

Regionally, services PMI reports will also be released for China, Japan and India.

The Italian general election result will also be in focus with voting set to end at 9am AEDT. Catril says an outcome should be known around 1pm Sydney time.

“The likely result is a hung Parliament, with the 5-star movement gaining the most seats but unable to form a majority government,” he says. “This sort of political gridlock is par for the course for the country.”

Later in the session, highlights include services PMI reports from the Eurozone, UK and US along with Eurozone investor sentiment and retail sales for Match and January respectively.