The Australian dollar slips as trade concerns resurface

Clive Mason/Getty ImagesClive Mason/Getty Images
  • The Australian dollar slid on Tuesday on renewed concern about US-Sino trade negotiations.
  • The main event today will be the US fed’s latest interest rate decision and updated economic forecasts.
  • Before the Fed, a senior RBA policymaker will deliver a speech. It’s expected to focus on developments in Australia’s housing market, so it could be market moving.

The Australian dollar fell across the board on Tuesday, weighed down by renewed concern about trade talks between the United States and China.

Here’s the scoreboard at 8am in Sydney on Wednesday.

AUD/USD 0.7088 , -0.0014 , -0.20%
AUD/JPY 78.96 , -0.17 , -0.21%
AUD/CNH 4.7609 , -0.0119 , -0.25%
AUD/EUR 0.6242 , -0.0022 , -0.35%
AUD/GBP 0.5343 , -0.0013 , -0.24%
AUD/NZD 1.0338 , -0.0022 , -0.21%
AUD/CAD 0.9443 , -0.0028 , -0.30%

After doing little in both Asian and European trade, the bulk of the Aussie’s move on Tuesday came late in the session, driven by a report from Bloomberg that Chinese officials are pushing back against US demands in trade talks.

The report weighed on risk assets, including the Aussie dollar which has been highly sensitive to shifts in sentiment towards trade negotiations over recent months.

“We are not too bothered by the news [given] it is normal negotiating behaviour,” said Joseph Capurso, Senior Currency Strategist at the Commonwealth Bank. “The negotiations could drag on for months and cap gains in Aussie dollar.”

A separate report from the Wall Street Journal that trade talks between the two sides will resume next week in an attempt to strike a deal was largely overlooked by markets.

The Bloomberg report saw the AUD/USD slide to .7086, a level it continues to hover near in late trade on Tuesday.

Investing.comAUD/USD Hourly Chart

The Aussie also fell against all of the major crosses, especially the Euro that was helped by a sharp improvement in German economic sentiment in March, along with adjustments to positioning ahead of the US Fed interest rate decision that will arrive later in today’s session.

A stronger-than-expected UK jobs report for January also helped to boost the British pound, helping to offset ongoing uncertainty about when and how the UK will leave the European Union.

“EU leaders are planning to offer the UK a conditional Brexit extension at this week’s summit, which would give May one last chance to try and get her deal through Parliament,” said Rodrigo Catril, Senior FX Strategist at the National Australia Bank.

The New Zealand dollar also rose against the Aussie, despite the China news, helped by another strong dairy auction result earlier in the session.

Turning to the day ahead, the main event of interest will be the release of the US Fed’s interest rate decision, along with the FOMC’s latest economic forecasts. There’ll be plenty of attention on the FOMC’s dot plot for year-end and long-run Fed funds rate projections, along with any commentary on the outlook for the Fed’s balance sheet.

The dot plot is widely expected to show a slower or no further policy tightening based compared to what was offered in December.

The decision will arrive at 5am AEDT, followed by a press conference from Fed Chair Jerome Powell.

Before that key event arrives, other highlights today include a speech from RBA Assistant Governor Michelle Bullock at 11am AEDT.

“[There’s] no tittle offered on the RBA website, but the invite in the event’s website has a rather punchy title of ‘Is it crunch time? The housing credit squeeze in a post royal commission economy?’,” said Catril at the NAB.

If that is the topic of Bullock’s speech, it will receive plenty of attention given the housing market is one key area of uncertainty facing policymakers at the RBA.

Elsewhere, other releases of interest today include New Zealand Q4 current account data, German PPI and UK CPI.

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