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AUD Trades Narrow Range as U.S – China Trade Talks continue

Published May 10, 2019

Author: Steve Oram

The Aussie Dollar opens at same levels as yesterday against the USD but down on other crosses as US– China trade wars continue to dominate the headlines, investors taking a risk-off approach until there is further news.  Today sees the release of the RBA’s Statement of Monetary Policy at 11:30am which may provide more insight on the decision this week to hold rates. The SOMP has in the past been a catalyst for currency movements but could largely be overlooked as the focus remains on Trade.

Trade Talks to Resume This Morning

Official trade talks have just kicked off in Washington as the U.S and China try to iron out their differences.  The day ahead is set to be full of headlines and rumours as the talks progress, but perhaps the biggest factor will be if President Trump goes ahead with the 25% tariffs he announced at the start of the week.  It is possible that the deadline could be extended, but Trump has certainly put the heat on China ahead of the talks.

Trump stated at a Florida rally yesterday that Beijing “broke the deal” that the US had been negotiating.  The risk-off tone to markets is set to continue until there are signs of progress, however various Chinese sources have stated that there is “zero” chance of reaching a deal this week. Trump later said he had received a “beautiful letter” from Chinese President Xi Jinping asking that they work together to “get something done” as negotiations between the world’s two biggest economies continued in Washington.

US Trade Balance Worsens

U.S data has largely been overshadowed by the trade negotiations taking place.  Overnight saw US employment claims advancing to 228,000, slightly worse than market expectations of 220,000, while the US trade deficit has widened to $50b from $49.3b previously, although slightly ahead of market expectations of $50.1b.  US CPI numbers for April are released tonight with markets expecting an annual inflation rate of 2.1%.