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The trade war is starting to bite

Published August 10, 2018

Author: Dennis Li

We were down by more than 80 points against the USD in the last 24 hours but still within the well documented range of 0.7330 -0.7470. As the escalating trade war continues to cast doubts on the ongoing strength of the Australian economy a test on the downside appears almost inevitable that could see a run down to 0.7150 if 0.7330 doesn’t hold. The EUR broke below key support against the USD at 1.1550 but any improvement against the AUD was negated by the Aussie falling at the same rate.

  • With better than expected data on US initial jobless claims and generally rising producer prices released last night, the USD rallied against most major currencies as investors bet global trade tensions and a robust American economy would continue to support the greenback.
  • China’s PPI for July released yesterday showed a slower factory price inflation compared to June amid a slowdown in economic growth. It is the first official reading on the impact on prices from the tariffs on $34 billion of US goods that went into effect on 6th  July.
  • The RBNZ unexpectedly committed to keep interest rates at record lows of 1.75% through to 2020 and its concerns around the persistently disappointing growth sent the NZD to a nearly 18-month low at 0.6609 against the USD. The AUDNZD was also supported on the comments up by more than 130 points in the last 24 hrs.
  • According to a WTO official, lower export orders and car sales are likely to slow the world trade growth in Q3 as the global tariffs war begins to bite.

The GDP data from Britain tonight and Japans later today along with US CPI data tonight may provide a clearer picture of the direction of global growth and therein the direction of the AUD.