Greg Gibbs, Analyst at Amplifying Global FX Capital, points out that the AUD has been one of the weaker currencies in recent sessions.
“We had thought that the AUD might come under pressure after the tariff news come out in early-March. We thought as a major exporter of steel-making commodities to Asia, it had as much to lose from steel tariffs as any country. Further, we thought that since US protectionist policy was chiefly aimed at China, AUD might be seen as a proxy for increased economic risk for China and the global economy.”
“Perhaps belatedly, after initially rising in early-March, the AUD is now responding to the risks from tariffs to growth in China and global growth. Chinese iron ore futures prices have fallen significantly since the tariff news.”
“China property market a risk for AUD
A number of economic reports in China have started the year on a strong note. However, a good part of the recent economic strength in China appears to have been supported by strong export growth. As such, increased USA protectionism directed at China represents a significant risk for economic confidence in China.
Recent data suggest that the Chinese property market is weakening, a key user of steel. This may also be spilling over to weaker steel-making commodity prices and the AUD.
The RBA was upbeat on its outlook for global and trading partner growth in their policy minutes released on Tuesday. But they made some comments that suggest there are risks towards slower growth in China.”
“Watch out for strong Australian employment report
Recent Australian economic data point to above-trend growth with booming business confidence and strong employment indicators. A strong employment report should be expected on Thursday this week. This might tend to support the AUD.
The AUD might also draw some strength from signs that the government might be able to gain enough support from Senators on the cross-bench to pass its proposed corporate tax cuts.”