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Just like where we were yesterday

Published August 2, 2018

Author: Dennis Li

With worsening Sino-US trade tensions, the Australian dollar, seen as a proxy for Chinese growth, slipped overnight by 40 points to a low of 0.7388 but once again we are at its preferred comfort level of 0.7400 against the greenback.

  • The US Federal Reserve kept interest rates unchanged as widely expected. While members view the economic, labour market and inflation developments as bringing the economy toward full employment, they also conclude that the stance of monetary policy continues to be accommodative. As such, it is implied that further gradual withdrawal of stimulus is appropriate. This is in line with Market expectations of two further interest rate increases this year – in September and December.
  • According to a senior official, the US President Trump’s administration proposed to increase the tariff rate on $200 billion worth of Chinese goods to 25 percent from 10 percent as the two countries continue conversations to determine if trade talks can be resumed.
  • On the reports of the new tariffs, the Chinese yuan slid more than 0.5% against the USD and the AUDCNY has also dropped more than 300 points in the last 24 hrs. China official said on Wednesday that ‘blackmail’ wouldn’t work, vowing to retaliate if the US takes further steps hindering trade. A survey also showed that Chinese manufacturing grew at the slowest pace in eight months in July.
  • With mixed messages in the markets, oil fell about 2% overnight due to a surprise increase in US crude stockpiles while investors worried that trade tensions could hit the energy demand.