By Perry Mitchell
After trading above the 0.68 handle during the early trading hours of the Asian session yesterday, the AUDUSD pair lost its traction and slumped to a daily low of 0.6744 before going into a consolidation phase in the second half of the day. Commodity-linked currencies will often bear the burden of the markets risk aversion – this saw the Aussie perform as the weakest G10 currency yesterday.
The geopolitical crisis occurring in Hong Kong was able to take the limelight from trade tensions overnight, as protestors in Hong Kong were able to close the airport to most flights. Ultimately prompting Beijing to describe the protest actions as ‘Terrorism’. It is far from clear how the escalating tension in the region, which is now 10 weeks old is going to be resolved. The fear is rising that the economic damage could be long-lasting.
On the US/China trade front, uncertainties continue to surround the September talks between the powers, this despite the US re-iterating their support for the talks continuing. Markets will be paying close attention to the USD/CNY rate and where the PBOC will set the USD/CNY, it has now left the rate above the taboo 7.000 level for three straight days and this is continuing to unnerve markets as to whether the US will continue to push the ‘China is a currency manipulator’ card and potentially further escalating the already stretched geopolitical tensions.
Locally, this morning we have the NAB Business conditions and Business confidence data for July to be released. There won’t be any other macroeconomic data releases from Australia until tomorrow’s Wage Price Index with expectations to come in at 0.5% for the quarter.
As noted yesterday, the backend of this week will see some significant economic data releases, including Aussie employment data and CPI and Retail sales data out of both the US and UK.
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