AUD/USD Exchange Rate Dips, US-China Trade Uncertainty Hits ‘Aussie’
The Australian Dollar US Dollar (AUD/USD) exchange rate eased today, with the pairing currently trading around $0.684 following a downturn in risk-appetite triggered by US Commerce Chief Wilbur Ross in which he downplayed the odds for a US-China trade deal by November.
Mr Ross commented:
‘It has to be the right deal, and it doesn’t have to be in November. The key thing is to get everything right that we do sign. That’s the important element. That’s what [US President Donald Trump] is wedded to. Whether it’s this day or that day might be interesting to the media, but it isn’t the real game.’
The AUD/USD exchange rate suffered as the risk-on market diminished and investors turned to safe-haven currencies. Talks between the world’s two largest economies are now expected to spill over into a ‘second phase’ of talks.
Xiaojia Zhi and Helen Qiao, Economists at the Bank of America Merril Lynch, commented:
‘Despite the rising expectation of a ‘phase-one’ deal between the US and China in November, we think growth headwinds will likely persist in the near term, given suppressed trade growth and weak domestic [capital expenditure] demand.’
The Australian Dollar (AUD) could weaken further against the US Dollar (USD) today if October’s flash Commonwealth Bank Manufacturing PMI confirms forecasts and slips into contraction territory.
USD/AUD Exchange Rate Improves, Global Political Uncertainties Boost ‘Greenback’ Safe-Haven
The US Dollar benefited from renewed demand today as traders flock to safe-haven currencies, with UK-EU Brexit uncertainty and deteriorating US-China relations weighing on risk appetite.
We could see some of the ‘Greenback’s’ gains clipped if the European Union grants the UK an extension, which would diminish fears for a no-deal outcome on October 31 and boost market appetite for riskier assets like the Australian Dollar.
Meanwhile, USD investors will be looking ahead to today’s US housing price index for August. Any signs of improvement could buoy confidence in the US housing market which took a hit yesterday after existing home sales fell below consensus in September.
However, if the American housing market continues to deteriorate, we could see the USD/AUD exchange rate struggle as this would bolster the case for a Federal Reserve Rate cut next week.
USD/AUD Outlook: Could Improving US-China Relations Boost the ‘Aussie’?
Tomorrow’s US goods orders figure for September is expected to ease by -0.2% and could see the US Dollar lose some of its gains against the ‘Aussie’.
Tomorrow will also see the release of October’s US flash Markit manufacturing PMI, which is expected to ease from 51.1 to 50.7.
US-China trade developments will continue to drive the AUD/USD exchange rate in the coming days, with any indications of improving relations between the two superpowers likely to provide a boost to the risk-averse and trade-correlated Australian Dollar.