Trumps trade war dents markets

March 22, 2018

Finport Currency Brief - Courtesy of Compass Global Markets.

 

Good morning all;

 

AUDUSD:  We’ve had a very interesting past few days both domestically and offshore. Local Unemployment edged up to 5.6%  and the US Federal Reserve tightened the Fed Funds rate to 1.75%, as forecast. All was going to plan with counter currencies grinding higher against the US$, as markets pared back thoughts on the number of future interest rate hikes to come, until orders from US President Trump to levy tariffs on $50-$60 billion of Chinese imports saw all gains reversed. US business leaders are not happy and the “risk on” environment we enjoyed has evaporated. Hopefully this is just wind from Trump (Friday humour) and a shot across the Chinese bow. Technically, A$US$ needs to hold above 0.76c to maintain the 2 year upward trend so the run in to Easter could be very important and one to watch for those repatriating funds.

 

AUDEUR: Recent gains versus the Euro have also been eroded as the A$ falls out of favour with those investors not happy with our less liquid currency and of course on the weaker data we have released recently. The move has been stymied somewhat with data that EU Business Activity contracted again, although it is still very much in  growth phase. There is no real data due this side of Easter, so I'd expect the 0.62c level to hold with a push to 0.63c a gift for those buying the common currency.

 

AUDGBP: This pair carries on its way lower as the Pound has much more catching up to do to regain the pre-Brexit levels and as 2 of 9 Bk of England policy makers called for a rate hike. This goes with my prior comments to expect the UK to tighten interest rates in May. All of which means we are 2 year lows and I can't really offer those buying Pounds any words of comfort or guidance, except for don't leave it too late. 

 

Jim Devonport

E: jim.devonport@finport.com

M: 0415 066 468 


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