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AUD opens lower as Trade Talks near deadlines

Published May 9, 2019

Author: Steve Oram

The Aussie Dollar opens lower this morning continuing to struggle below the 70 cent mark the main cause has been the ongoing US-China trade war.

Trade Talks Continue

Chinese state media have recently reported that the nation has full assurance that the recent challenges between the US and China can be overcome. This comes as trade negotiations with the US are set to take place tomorrow in Washington.  Focus will be on whether the US will follow through on threats to implement tariffs on Friday.

The world’s two largest economies have been embroiled in a tit-for-tat tariff war since July 2018 over U.S. demands that China adopts policy changes that would better protect American intellectual property and make China’s market more accessible to U.S. companies.

Beijing said yesterday that China would retaliate against the US, taking countermeasures if the Trump administration follows through with planned increases should talks break down. The US Trade Representative has already filed paperwork to increase the tariff rate on $US200 billion worth of Chinese imports this Friday. Those developments would mark major escalations in the trade war between the world’s largest economies, just before deal was expected to be reached.

Today see’s Chinese CPI figures for April due out at 11:30am and is expected to improve in April to 2.5%, any weak numbers will put more pressure back on the AUD.

RBNZ Indicates Concern Over Global Growth

Close to us it was the Kiwi’s turn to do what the RBA couldn’t, as the RBNZ cut the official cash rate by 0.25% to 1.50% yesterday.  Trading overnight in the NZD was fairly well contained with the currency staying within a fairly tight range.  It looks as though yesterday rate cut was largely priced in by the market which has capped any further losses.  NZD has remained flat with the Australian Dollar. Yesterday’s rate cut by the RBNZ was the first in over 2 years.

Governor Orr commenting that a lower OCR was necessary to support employment and inflation policy.  The committee was also concerned about the risk of a larger than anticipated slowdown in global economic growth, particularly in Australia and China.  While the bank was not overly dovish in its comments, it has indicated the potential for one more cut in the current cycle.

Elsewhere in the world Brexit talks with Labour party continue as both sides seek compromise according to Theresa May’s office. Trump was also busy with placing new Iranian sanctions on iron, steel, copper and aluminium sectors. A report from the Climate Council believes climate change could wipe $571 billion from the Australian property market in value over the next decade, finding the risk for QLD was double that of other states. Tonight will see PPI reports and unemployment claims number out of the US.