As China retaliates to Trump's import tariffs with some of their own, a longer term trade war is looking more likely. If this continues, the AUD is likely to suffer as a commodity based currency. This report looks at how investors moving funds out of AUD and potentially into the USD could affect the value of the Aussie Dollar. The table below shows the difference in AUD you could have achieved when buying £200,000.00 during the high and low points of trading yesterday.

Currency Pair% ChangeDifference on £200,000
GBPAUD0.7%$2520 AUD
Australian employment figures due tonight

China concerns for commodity based Australian Dollar

China’s Caixin report pointed to its slowest business activity in 4 months, as independent readings for both services and manufacturing both fell off. Furthermore, employment also showed a slight decline.

Weaker than expected services data was due to a lack of new orders for the month of March.

Whenever a slowdown such as this occurs in the services and manufacturing sector, commodity currencies often feel the brunt. China is Australia’s largest trading partner, therefore a slowdown in manufacturing and lack of demand normally has a negative effect on the Australian Dollar.

The US China trade War could also spell trouble for the Australian Dollar. Stock markets are already starting to shake as a long term trade war draws closer. In times of uncertainty, investors are likely to remove their funds from the commodity based currencies such as the Australian Dollar and put them into the US Dollar, known as safe haven currencies. This will most likely have a negative impact on the AUD as a result.

This morning’s trade balance data was a welcome sign for investors, with imports slightly rising. Although this has little effect on the markets for now, investors will welcome this as a positive for economic growth throughout 2018 if this continues.

Where next for Australian Dollar exchange rates?

The Australian Dollar has been on a downward trend against Sterling for some time now, and I am of the opinion that this will continue. Slow housing data released yesterday backed up the Reserve Bank of Australia’s decision to not raise interest rates on Tuesday night’s meeting.

I personally think that there is still more ground to be lost for the Aussie against sterling, due to the feeling on the global markets combined with a resilient Pound. However, with Brexit crunch talks looming this month, any gains for Sterling have the capability to be quickly reversed.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.