The Australian dollar enters a holding pattern as trade uncertainty builds

Eric Piermont/ AFP/ Getty Images
  • The Australian dollar had a quiet session on Thursday as traders await the implementation of US tariffs on Chinese imports.
  • Tariffs on $US34 billion worth of Chinese imports will kick in at 2pm AEST. China has promised to respond with reciprocal tariffs.
  • US non-farm payrolls for June is the data highlight for the session.

The Australian dollar traded mixed on Thursday as a lift in investor risk sentiment was offset by festering concerns about the outlook for global trade ahead of the introduction of tariffs from the United States and China.

As has been the case throughout the week, the Aussie’s moves largely mimicked those seen in the offshore traded yuan, or CNH.

Here’s the scoreboard at 7am in Sydney.

AUD/USD 0.7387 , 0.0007 , 0.09%
AUD/JPY 81.74 , 0.23 , 0.28%
AUD/CNH 4.9174 , 0.0164 , 0.33%
AUD/EUR 0.6317 , -0.0013 , -0.21%
AUD/GBP 0.5587 , 0.001 , 0.18%
AUD/NZD 1.0878 , -0.0033 , -0.30%
AUD/CAD 0.9699 , -0.0003 , -0.03%

After meandering either side of break-even for much of the Asian session, the AUD/USD lifted in European trade, helped by strong German economic data, hawkish central bank rhetoric and signs of an easing in trade tensions between the European Union and United States.

However, after lifting to as high as .7408, the AUD/USD gave back ground in the latter parts of the session.

The minutes of the US Fed’s FOMC June policy meeting to dispel that view that two rate rises are likely to be seen this year. The US non-manufacturing PMI report for June was also strong.

The AUD/USD fell to as low as .7371 before recovering into the close.

Investing.comAUD/USD Hourly Chart

Turning to the day ahead, the direction of the Aussie will likely be dictated by the performance of Chinese financial markets — especially the offshore traded yuan — as the US readies to implement new tariffs on Chinese imports.

Proposed US tariffs on $US34 billion worth of Chinese imports are due to kick in at 2pm AEST. The tariffs will eventually be extended to $US50 billion worth of imports.

China has promised to retaliate by implementing the same amount of tariffs on US imports.

US President Donald Trump has pledged to announce additional tariffs on $US200 billion worth of Chinese imports should China retaliate, and potentially $US200 billion more should China respond to that move.

On the data front, Australia’s Performance of Construction Index (PCI) will arrive at 8.30am AEST. Japan will also release labour cash earnings and household spending figures.

Beside the tariff deadline, there’s also a raft of heavy-hitting economic data scheduled later in the session, headlined by US non-farm payrolls for June.

“[This] is the data highlight for today,” says Rodrigo Catril, Senior FX Strategist at the National Australia Bank (NAB).

“The market is looking for 195,000 payrolls print, but NAB sees the risk for a softer print at 170,000 amid a number of indicators suggesting the trend in job growth is slowing.”

Perhaps of more importance than the payrolls figure, the unemployment rate is tipped to hold steady at 3.8%. Average hourly earnings are also expected to lift by 0.3%, leaving the increase over the year at 2.8%.

Elsewhere, other data highlights include German industrial production, and Canadian trade and jobs figures, along with US trade figures for May.

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