As Chinese stockmarkets continue to slide, fears surrounding the knock on effect to Australia’s economy continue to push the Aussie dollar lower. At the time of writing AUD is trading relatively close to a 2 ½ year low against the US dollar and a 2 ¼ year low against the pound.
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Yesterday it emerged that profit growth in China’s industrial firms slowed for a 5th consecutive month up to September, and sales of raw materials and manufactured goods have also shown a decline. China’s trade war with the US appears to be negatively impacting China to a greater extent at the moment, and as they are Australia’s largest trading partner, AUD is paying the price.
Another reason for the declining value of AUD is the divergence between the Reserve Bank of Australia’s base rate compared to the US Federal Reserve Bank's. It’s currently at its biggest in the history of the Aussie dollar which is why we’ve seen the currency lose value gradually against the US dollar throughout the year. There are no plans for rate hikes from the RBA until next year so I expect to see AUD remain under pressure.
The Grattan Institute, an Australian think tank, released a downbeat study on the Australian economy over the weekend. The report focused on falling home ownership among Australia’s young, increasing costs of medical treatment and electricity prices and stagnant wage growth. The RBA is keen to hold rates where they are until late next year and those of our readers hoping for a stronger AUD should be aware of this.
In the early hours of tomorrow there will be Inflation data released with 1.9% expected (Year on Year). On Thursday there will be Import/Export data and then on Friday Retail Sales. If you wish to plan around these releases do make us aware, and for some trade types we can execute trades 24-hours a day so it’s worth getting in touch if you’re concerned about the time difference.
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