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According to Sean Callow, Research Analyst at Westpac, the extent of AUD resilience in the face of the latest phase of US-China trade battles has been a little surprising.

Key Quotes

“A week ago, it wasn’t yet clear what the timetable was for President Trump’s next step on China tariffs, so an announcement that 10% tariffs on $200bn of imports would commence as soon as Monday rattled AUD – at least initially. China has pledged tariffs on $60bn of US imports once the US tariffs take effect.”

“But the recovery in AUD and risk assets soon after the news suggests that this phase of the trade battle was indeed priced in. After all, Trump asked the US trade representative to identify $200bn in imports to be subject to a 10% tariff way back on 18 June, including the threat of yet more tariffs if China responds. (Though the $200bn has become $267bn).”

“Commodity currencies AUD, NZD and CAD are among the strongest in the G10 over the week (kiwi helped by today’s solid Q2 GDP data). It is probably no coincidence that speculators have been short each currency against the greenback (at least in US futures markets). There should be further gains for these currencies in the week ahead.”