The Aussie ends the week as a net loser thanks to the ongoing trade war between the U.S. and China escalating, as well as expectations of more interest rate cuts to come from the Reserve Bank of Australia.
Australia Headlines and Economic data
- Australia services PMI falls -8.3 points to 43.9, indicating contractionary conditions in the non-manufacturing sector
- Broad move lower for the Aussie against the majors right off of the week start, most likely reacting to the news of China halting US agricultural imports in retaliation for Trump’s tariff increase. It’s signal that the damaging trade war between the two countries may get worse and most likely, the catalysts for traders to unload relatively riskier assets.
- Uniform roller coaster moves for Aussie pairs during the early Asia session, likely on global risk sentiment moves sparked first by a reaction to the U.S. officially labeling China as a currency manipulator. The turn around later came when the PBOC made moves to limit the weakness in the yuan, bringing some relief to the markets and thus sparking the broad bounce in the Australian dollar, and possibly on positive news form Australia after the latest data shows a trade surplus that expanded to a record $8B
- The RBA keeps interest rates on hold — but admits the economy has slowed more than it expected
- AIG Construction index falls to 39.1 in July vs. 43.0 previous
- In Australia, lending commitments to households rose 1.3% in June 2019, following a 1.6% fall in May
- The Aussie falls lower on the session, likely in sympathy with its close trading partner, the New Zealand dollar, which fell during the Asia session after the surprise rate cut from the RBNZ.
- A reversal of risk sentiment towards positive, likely on China’s rhetoric to stabilize the yuan and the positive Chinese trade data, was probably what had traders reversing the Aussie’s fall from earlier in the week.
- RBA governor Philip Lowe grilled on low interest rates
- Australia economy seen turning up, rate cuts still on table – The Aussie saw pressure on the session with the idea of rate cuts as still a possibility, a move that was further fueled by a rise in risk aversion sentiment on the Friday session. The bearish tilt was likely on the news that the US government won’t do business with Huawei and is not ready to make a trade deal with China.