- The Australian dollar fell heavily on Tuesday as trade tensions between the United States and China escalated.
- The AUD/USD fell to the lowest level since May 2017 before inching higher in late trade.
- The data calendar is quiet today, meaning geopolitics and the ECB central banking forum in Portugal will likely dictate direction.
The Australian dollar fell heavily on Tuesday as trade tensions between the United States and China escalated.
The largest losses were seen against the Japanese yen and US dollar, although the Aussie actually managed to eke out small gains against other commodity currencies as well as the euro.
Here’s the scoreboard as at 7am in Sydney.
AUD/USD 0.7382 , -0.0039 , -0.53%
AUD/JPY 81.24 , -0.79 , -0.96%
AUD/CNH 4.7803 , -0.0091 , -0.19%
AUD/EUR 0.6368 , -0.0016 , -0.25%
AUD/GBP 0.5603 , 0.0001 , 0.02%
AUD/NZD 1.0689 , 0.0005 , 0.05%
AUD/CAD 0.9803 , 0.0007 , 0.07%
After opening the session just above the 74 cent level, the AUD/USD was hit hard in early Asian trade, tumbling to the lowest level in over a year as US President Donald Trump directed officials to draw up a list of a further $US200 billion worth of Chinese imports that could be targeted with tariffs of 10%.
He threatened to extend that list by a further $US200 billion should China retaliate with additional tariffs on US imports of their own.
“If the United States loses its senses and publishes such a list, China will have to take comprehensive quantitative and qualitative measures and retaliate forcefully,” China’s Ministry of Commerce warned in a statement.
The back-and-forth trade spat saw the AUD/USD slide to as low as .7347, the lowest level since May 11 last year.
The Aussie was also undermined by sharp losses across most commodity prices, as well as Asian stocks.
However, as seen in the hourly chart below, the AUD/USD managed to crawl off the mat in North American trade, supported by a recovery in US stocks as well as remarks from White House economic advisor Peter Navarro that the government is open to further dialogue on trade with Chinese officials.
While the Aussie was hit hard against the dollar and Japanese yen, it finished marginally higher against other commodity-linked currencies such as the New Zealand and Canadian dollars.
It also managed to cut earlier losses against the euro, helped by dovish remarks from ECB President Mario Draghi at a central banking forum in Portugal.
“We will remain patient in determining the timing of the first rate rise and will take a gradual approach to adjusting policy thereafter,” Draghi said at the ECB forum in Sintra, Portugal.
The remarks were similar to those offered following the ECB’s monetary policy meeting last week, and, as was the case then, weighed upon the euro.
Turning to the day ahead, geopolitics looks set to dictate direction once again in the absence of any major data releases.
There’s nothing of note released in Asia with only German producer prices and US existing home sales arriving in the second half of the session.
The ECB forum will continue in Portugal, including an appearance from RBA Governor Philip Lowe.
“Lowe is on a policy panel at the ECB Forum tonight with Draghi, Kuroda and Powell that’s bound to get a lot of wire coverage, the panel moderated by a senior economics editor at Bloomberg,” said David de Garis, Economist at the National Australia Bank.
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