Australian Dollar hit by Trade Wars
In times of global economic uncertainty, commodity-based currencies such as the Australian Dollar usually struggle as investors seek safe haven investments for their money. Due to this the Australian Dollar has come under pressure lately due to the trade war between the US and China.
Australia has a heavy reliance on China purchasing it’s exports and as such any fall in Chinese growth has a knock on effect on the Aussie. There has been steep fall in Chinese trade activity for last month caused by the ongoing trade impasse with the United States.
Could there be further rate cuts from the RBA?
Another factor in the value of AUD has been the Reserve Bank of Australia’s (RBA) decision to cut interest rates to a record low of 1.25% earlier this year. This was an attempt to boost inflation towards the RBA’s target level of 2-3%. Based on comments from RBA members earlier this year there are predictions in the press that we could see more rate cuts later this year. This has the probability to weaken the Australian Dollar.
Those with an Australian Dollar requirement should keep an eye out for Australian employment data due out in the early hours of Thursday. Unemployment has risen in Australia of late, which was a contributing factor in the RBA’s recent rate cut, and if this is reflected yet again in May’s figures then the Aussie could lose value.
Comments from any RBA members following this data release could give an insight to monetary policy moving forward could therefore have an impact on the Australian Dollar.
Australia’s problems do not have the same weight as those of the UK’s, with no Prime Minister and Brexit in limbo, the Pound could be set for further losses, with the majority of candidates up for Tory leader ready to bring a ‘no deal’ back to the table. I expect Sterling to remain fragile for the foreseeable future.
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