Australian Dollar Talking Points
AUD/USD[1] gives back the advance from earlier this month as China pledges to retaliate to an additional $200B in U.S. tariffs[2], and recent price action raises the risk for a larger pullback as the exchange rate snaps the series of higher highs & lows from the previous week.
AUD/USD Rebound Unravels as China Pledges to Retaliate to U.S. Tariffs
The growing threat of a trade war[3] may continue to sap the appeal of the Australian dollar[4] as it clouds the economic outlook for the Asia/Pacific region, and the ongoing spat between the U.S. and China, Australia’s largest trading partner, may keep the Reserve Bank of Australia (RBA) on the sidelines as ‘one uncertainty regarding the global outlook stems from the direction of international trade policy.’
As a result, the RBA may merely attempt to buy more time at the next meeting on August 7, and Governor Philip Lowe & Co. may continue to endorse a wait-and-see approach for monetary policy as ‘the low level of interest rates is continuing to support the Australian economy.’ With that said, the lack of urgency to lift the official cash rate (OCR) off of the record-low may continue to produce headwinds for AUD/USD especially as the Federal Open Market Committee (FOMC)[5] looks poised to deliver a 25bp rate-hike in September, and the pair may continue to track the bearish trend from earlier this year as Chairman Jerome Powell & Co. warn that ‘it would likely be appropriate to continue gradually raising the target range for the federal funds rate to a setting that was at or somewhat above their estimates of
