Sean Callow, analyst at Westpac, points out that Monday saw the break of the closely watched USD/CNY 7.00 level with AUD/USD falling about 0.5c on the yuan’s slide, as regional equities and currencies tumbled.
Key Quotes
“Concern over deteriorating US-China trade relations was amplified less than 24 hours later, as a series of tweets by President Trump alleging FX manipulation by China culminated in the US Treasury formally designating China as a currency manipulator.”
“What hurt AUD more than trade tensions was Wednesday’s shock 50 basis point rate cut by the RBNZ, from 1.5% to 1.0%.This knocked the Aussie to the 0.66 handle for the first time since 2009. The accompanying slide in Australian yields was arguably excessive just a day after the RBA’s steady hand at its monthly meeting.”
“The RBA still expects Australia’s economic growth to pick up from 2.5% this year to 2.75% in 2020. And for all the concern over US-China trade tensions over the past year, this week Australia reported a record-smashing trade surplus of A$8bn in June.”
“Yet any relief for the Aussie could be short-lived, as an important domestic data calendar looms in the week ahead. Along with July business confidence and August consumer sentiment surveys, we will see Australia’s Q2 wages and July labour force data.”
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