AUD is worst performer as trade tensions escalate

Daily Currency Update

AUD - Australian DollarThe Australian dollar slipped lower through trade on Friday and opens the new week below supports at 0.6750. Attentions were largely affixed to US Fed president Jerome Powell on Friday as he delivered the opening address at the Jackson Hole symposium of Central Banks. Analysts had anticipated Powell would proffer a dovish bias when assessing both Global and US growth prospects. Powell reiterated the FOMC’s commitment to monetary policy flexibility, hinting at additional easing in the near term. Despite market bets for a US rate cut this month the AUD trended lower as Powell’s commentary was overshadowed by escalating trade war tensions. China announced tariffs on $75 billion of US goods while Trump responded by promising another 5% on all $550 billion Chinese imports. The unexpected announcement sent equity markets plunging, while bond yields and commodity currencies fell sharply. The AUD plunged through 0.67 to touch 0.6684 marking the largest losses across G10 currencies. The AUD found some support in the Dovish Fed commentary and fears the US and President Trump is moving nearer to currency intervention in a bid to dampen dollar demand. Pushing back through 0.67 the AUD opens this morning buying 0.6733 US cents. Attentions now turn to this weeks Private Capital Expenditure and building Approval numbers as the headline items on the domestic docket while Chinese manufacturing and a raft of US data sets dominate the global ticket. We expect the AUD will remain vulnerable to further trade uncertainty with support at 0.6680 holding for now.