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Aussie finds support amid persistent US recession concerns

Published October 3, 2019

by Perry Mitchell

The Aussie rebounded modestly in the second half of the day yesterday and retraced its daily drop that caused the pair to touch its lowest level in nearly a decade at 0.6672. As of writing, the Aussie has found support around 0.6690 – 0.6700.

The dovish tone that the RBA adopted in its policy statement on Tuesday after announcing 25 basis points cut to its policy rate has weighed heavy on the Aussie. However, resurfacing recession fears in the US amid poor macroeconomic data releases caused a flight to safety which sent the US Treasury bond yields to fall sharply to 1-month lows and hurt the US Dollar. The Dollar index erased all of its weekly gains and is now testing the 99 handle, losing 0.15% on the day.

US Data Releases

The ISM PMI Data that was released yesterday show that the economic activity in the US manufacturing sector contracted at its stronger pace in 10 years. Adding to this, the ADP Employment change in its monthly report yesterday revealed that the employment in the private sector rose to 135,000 in September but falling short of market expectations of 140,000 – adding to the US dollar weakness.

Escalating global trade tensions

The US to impose retaliatory tariffs on EU imports – A US Treasury Official spokesman has said that the US will impose retaliatory tariffs of 10% on EU aircraft, 25% on agricultural and industrial goods. What are the implications of this? If the US retaliates, we will be dealing with an escalation of additional global trade threats. This ultimately will not bode well for risk assets and currencies linked to trade… such as the Aussie.

Locally toady the ABS will release Australian trade balance data out at 11:30 am AEST with expectations to come in at 6.00B, the previous release of 7.27B. Tomorrow Australian retail sales will also be released with the RBA Assistant Governor Ellis speaking. Being the start of a new month, tomorrow night will also see the release of further US employment data ahead of US Fed Chair Powell speaking.