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AUD again suffers the vagaries of US-CHINA trade comments

Published February 28, 2019

By Nicholas Cork

US trade representative Lighthizer told Congress on Wednesday that the issues between the US and China are “too serious” to be resolved by promises to purchase more US goods, and would need to include “significant structural changes” around the protection of intellectual property rights before the two countries strike a permanent trade deal.

These are the first public comments from the US’s top trade negotiator since President Trump said earlier in the week he would delay a self-imposed 1st March deadline to raise tariffs on USD200 billion worth of Chinese goods from 10% – 20%.   Markets reacted negatively to the comments and sold both the AUD and NZD against most currencies, with the AUDJPY notably reversing course after trying to break above 80.00, and US yields spiked higher.

US Fed Chair Jerome Powell continued his two-day testimony before the US Congress and said the Fed will stop shrinking its USD 4 trillion balance sheet later this year, adding that doing so would leave the balance sheet at about 16-17% of GDP, up from about 6% before the financial crisis.  How the Fed plan to manage this is yet to be decided with Powell commenting the Fed ‘still have a bunch of decisions ahead of it’.

Today Chinese Manufacturing is the highlight, and US GDP tonight.  AUD has slipped back below 0.7150 to start the day…  range bound trading appears likely

AUD chart (Reuters)