The Trump Factor
With data releases down under thin on the ground for the remainder of the week I thought I would bring up the possible implications of Donald Trump’s election on the Australian Dollar. His campaign was mainly geared toward lambasting Hilary Clinton in an attempt to weaken her credibility and his policies were often radical. His views on immigration managed to wipe of 10% off the value of the Mexican Peso and Asian stock markets tumbled on news of a Trump victory.
The key factor that will affect Australian Dollar value is China. China is Australia’s main trade partner for raw materials and as such the level of Chinese growth can have significant effect on the Australian Dollar. Trump stated during his campaign his desire to limit trade with the Chinese, the implications of which would be catastrophic for both economies with the potential to wipe trillions of each country’s GDP. Trump has changed his tune on several key issues since his election however, as his recent change of view on climate change has demonstrated this although he did seem to point the finger at the Chinese as the major culprit.
His attempts to keep manufacturing and labour US shores could jeopardise the US economy. He recently said that he is going to pull out of Tran-Pacific Partnership on his first day in office. Some have mentioned that the Chinese may not be interested in the partnership if the American’s are not involved,but taking into account Trump’s current stance it could in fact be greatly beneficial for the Chinese,who were previously excluded from the deal.
Taking these factors into account, keep a close eye on US trade relations. Trump’s election will have implications on the Chinese economy and that will have bearing on Australia. The link is not to be underestimated, we could be in for a volatile period for the Aussie.
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Executive Dealer – Foreign Currency Direct PLC