The Australian dollar could face many more challenges ahead after US President Donald Trump announced new trade tariffs on Chinese imports worth $200 billion and which will take effect next Monday. The potential impact of escalating trade wars between the US and China on the Aussie is discussed in the market report below. The range of GBPAUD exchange rates during trading hours on 18.09.2019 is displayed in the following table, along with the potential difference in AUD return when selling £200,000.00 during the high and low points.
|Currency Pair||% Change||Difference on £200,000|
The Australian dollar took some losses immediately following the announcement but in a twist the Aussie dollar made material gains after there was no immediate response to retaliate from China. Surprisingly the Australian dollar was actually boosted following gains on Asian stock markets and with rates for AUD GBP gaining over 1%. How China responds to the tariffs will inevitably shape the direction for the Australian dollar but so far the response and general tone from China has been conciliatory.
Expect more volatility for the Aussie as meetings between the US and China take place to try and move forward with a negotiation on trade. If the trade war does not escalate further then this should continue to prove beneficial for the Aussie.
The Reserve Bank of Australia (RBA) minutes from its September meeting highlighted that the central bank is in no hurry to raise interest rates due to weak wage growth and low inflation. The minutes that were slightly more hawkish do suggest that whilst there isn’t a strong case for an adjustment soon the next move in rates is more likely to be up. The RBA also warned that there was a material risk from protectionism and cited it as a risk for both the global and Australian economies.
Housing data down under is also on a negative trend after prices fell -0.7% in the second quarter.
Although the figure was in line with expectation it will give no comfort to the RBA which pays close attention to the state of the property market. It means that house prices in Australia have fallen for the first time since 2012 on an annual basis although much of the drop has been seen in Sydney and Melbourne leading some commentators to suggest this is more of a correction rather than a property market crash about to happen. It does still signal a cooling in the Australian economy and with the implications of the trade war yet to be seen the Aussie could face some tougher times ahead.
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