AUD down as China tariff proxy and weaker commodity prices - AmpGFX

The AUD rose quite significantly in the weeks after steel and aluminum tariffs news hit on 1 Mar, appreciating from near 0.77 to above 0.79 on 14-Mar, before slumping in two days back to 0.77, points out Greg Gibbs, Analyst at Amplifying Global FX Capital. 

Key Quotes

“In recent weeks it has struggled around its lows for the year; somewhat below 0.77.”

“The initial rise in AUD in the first half of March was confounding but might be explained by political uncertainty in the USA and mixed debate over the impact of the steel tariffs.”

“The fall in recent weeks might reflect an eventual acceptance that steel tariffs could not be good for the commodity exporter, the continued fall in steel-making commodity prices in China, and rumours that the US would introduce more targeted tariffs aimed specifically at China.”

“On 21 March, in the hours after the FOMC policy decision to hike rates, news broke that Trump was set to announce broad-ranging tariffs against China the following day.  On 21/22 March, global equities fell on the reports and announcement by Trump that the US planned tariffs on $50bn of Chinese imports, and retaliation by China that it would initially raise tariffs on $3bn of USA imports.  The AUD appeared to slide further, especially on crosses, in response to the tariffs.”

“The increased fear of trade war appeared to weaken the USD against a range of currencies; in particular, the JPY and EUR. However, these moves are reversing in trading so far this week.”