AUD: Trade war fears may now be easing - AmpGFX

According to Greg Gibbs, Analyst at Amplifying Global FX Capital, we cannot be sure that the AUD will continue to slide on trade war fears and in fact, it has regained some lost ground against the EUR, JPY, and NZD in trading on Wednesday, in the context of a bounce in the USD.

Key Quotes

“The bounce in the USD is a perhaps a sign that fears over trade wars may start to calm as we head into April.  The China/North Korea leaders’ meeting might be seen as a sign that China is seeking to help the denuclearization process as part of diplomatic efforts to contain US trade protectionism.”

“The USA has also reached a new trade pact with South Korea and this may point to less risk of a trade war breaking out between the US and China; showing that it is using a stick and carrot approach, and is willing to discuss and come to an agreement on trade.”

“If so, to the extent that the AUD’s recent fall has reflected a proxy role for a US/China trade war risks,  it is possible to see a rebound in global risk appetite and recovery in the AUD in coming weeks, perhaps more so against crosses.”

“On the other hand, Chinese commodity prices remain at recent lows, and this may reflect broader issues over demand for steel in China.  Recent property market data in China suggests that the sector is in a slowdown that might dampen construction activity.  Chinese authorities also appear to be paying more attention to tightening less regulated and shadow credit markets.”

“As such, we might keep a close eye on Chinese commodity prices and their influence, or otherwise, on the AUD.”