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Weaker USD propels the AUD

Published August 27, 2018

Author: Dennis Li

It may have appeared that the AUD enjoyed the elevation of Scott Morrison in becoming Australia’s 30th prime minister but it was more of a relief rally initially with the real move happening on Friday night. The Aussie rallied solidly through 0.7300, 1% higher than mid Friday afternoon our time supported by Powell’s comments and a weaker greenback.

  • The USD dipped with the Federal Reserve Chair Powell’s dovish speech at Jackson Hole on Friday saying a gradual approach of raising rates remains appropriate to protect the US economy and jobs growth while he also suggested that the Fed funds rate is getting closer to neutral where its rate-hiking path will be ceased.
  • According to a Mexican official on Sunday, a breakthrough in negotiations between the US and Mexico on bilateral differences from the North American Free Trade Agreement (NAFTA) could pave the way for a broader agreement including Canada.
  • The two-days talks in Washington between the US and China’s mid-level officials did little to resolve the worsening Sino-US trade tensions and ended without a joint statement.
  • China’s central bank said on Friday that it was adjusting its methodology for fixing the yuan’s daily midpoint in order to keep the currency market stable amid the escalation of trade wars between the world’s two biggest economies.

The economic calendar is a bit light on this week until Friday when we get China’s PMI; the first that will show a full months impact of the trade war.