Author: Dennis Li
After US President Trump’s decision to slap 10% tariff on the remaining $300 billion in Chinese imports, China vowed to fight back, letting its yuan weaken below the key psychologically important level of 7 against the USD, the lowest in the onshore market since the 2008 global financial crisis. According to the latest report, the Chinese government has backed down on its pledge to resume purchase of American farm products and threatened to slap additional tariffs on them, a development that could set the stage for further escalation in a trade dispute between the two biggest economies. The US stock markets plunged in the last 24 hours with the Dow dropping 767 points, the S&P 500 index fell by 2.98% and the Nasdaq 3.47%.
Overnight we saw the AUD continue to drop further below 0.6800 against the USD while losing 1.34% of its value against the EUR under the combined effect of US-China trade war and the uncertainty of UK’s Brexit. Investors will keep a close eye on the RBA August monetary policy meeting later this afternoon and hopefully get some ideas around where the Australian economy is heading amid the uncertainties of the global economy. A rate cut is unexpected nor factored in. Chinese trade data on Thursday and Chinese inflation on Friday is potentially additional market moving data.
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