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RBA tomorrow and another tariff shock

Published June 3, 2019

Author: Rhys Miles

As if the markets didn’t have enough to worry about with the China USA trade war, Trump has now announced his intentions to apply tariffs to the US’s number one trading partner, Mexico. His actions are seemingly a response to what Trump considers inaction on their porous borders and the human traffic flow. Equities markets reacted accordingly with a 1.50% drop on the Dow and European equities off as well.

Despite risk off sentiment dominating, the AUD has held up well around the 0.6900 level. With the RBA decision tomorrow and our GDP being the focus of the week, the aforementioned Mexican situation has thrown in yet another consideration for market participants. A 25 point cut from the RBA has been factored in so a non- move would be the shock. The subsequent movement of the AUD will be determined by the accompanying language from the RBA and how that language is attached to a slower global growth story.

With Oil off, gold up and increasing speculation of an interest rate cut in the US it is going to be an interesting week culminating in US Non-Farm payrolls on Friday and a European Central bank decision on Thursday.