Australian Dollar Down as Trump Confronts Economic Superpowers China, EU on Trade

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Headlines

  • Trade War Fears Rise as Trump Confronts Chinese Investment – Market risk appetite plummets
  • Euro Steady despite Worsening German Business Confidence – EU Summit Ahead
  • CAD Down in the Dumps – Weak data and poor risk appetite weigh on ‘Loonie’
  • Harley-Davidson Responds to EU Tariff Measures – USD Fluctuates


Australian Dollar

The Australian Dollar posted a weak performance yesterday, falling against the majors as investors responded to yet another escalation in global trade tensions.

US President Donald Trump has announced plans for a fresh crackdown on Chinese investment in the US, with laws preventing firms with at least 25% Chinese ownership from acquiring American companies in the areas of robotics, aerospace and electric vehicles.

This news was accompanied by a cautionary tweet from the President himself, in which he advised countries with tariffs against the US to remove them, or ‘be met with more than reciprocity by the USA’.

Looking ahead, today will feature the Australian ANZ Roy Morgan weekly consumer confidence index, though this reading will likely play second-fiddle to the ongoing trade tension.

Sterling

The Pound (GBP) fluctuated against the majors yesterday, falling in the early hours before rising later in the day.

There wasn’t much to kick off the week in respect to data, but investors were still digesting last Thursday’s hawkish Bank of England (BoE) votes from the BoE’s Andy Haldane, Ian McCaffee and Michael Saunders, and the possibility that an August rate rise might be on the cards.

On that note; investors will be scrutinising a speech from Mr McCafferty today in London, followed by a speech on Wednesday by Mark Carney.

If McCafferty further lays the groundwork for an August rate hike then GBP could continue its climb.

Euro

The Euro (EUR) proved surprisingly steadfast yesterday, rising despite diminishing business confidence in Germany.

Fearing the spectre of a trade war, the German IFO current assessment reading fell from a score of 106.1 to 105.1 in June, missing the forecast of 105.6.

News that the EU tariffs have pushed Harley-Davidson into moving some manufacturing outside of the US did seem to have a bolstering effect on the single currency, however, with the Euro siphoning demand away from the ‘Greenback’ in light of this news.

US Dollar

The US Dollar (USD) fell against the Euro and the Pound yesterday, but traded broadly higher otherwise.

Investors seemed disappointed by news that Harley-Davidson will be shifting some of its production abroad, but a substantial recovery in new home sales, from -3.7% to 6.7% in May (smashing the forecast of 0.8%) may have given the ‘Buck’ a little boost.

Today, investors will be assessing the June consumer confidence reading and the Richmond Fed manufacturing index, with upbeat results liable to keep the US Dollar afloat.

Canadian Dollar

The ‘Loonie’ is not doing well today, with last week’s run of poor Canadian retail sales and consumer price inflation readings leaving the Canadian Dollar down in the dumps.

Investors continue to have little faith in NAFTA negotiation progression, and with the US on a war-path for fairer trade, this could be set to continue.

Today, Bank of Canada Governor Stephen Poloz is set to speak with Provincial Ministers in Ottawa, and if he does discuss monetary policy then it seems likely that his sentiment will be heavily informed by last week’s weak inflation and retail sales prints.

New Zealand Dollar

The New Zealand Dollar (NZD) also came under heavy pressure at the start of the week, with the recent fall in dairy product prices leaving the ‘Kiwi’ Dollar floundering.

Investors are now preparing for the looming Reserve Bank of New Zealand rate decision, though analysts are fairly certain that the central bank will keep policy unchanged.


Data Released

26th June 18:30 GBP BBA Loans for House purchase
26th June 19:30 GBP BoE McCafferty Speaks in London
26th June 23:00 USD S&P Case-Shiller Composite

Post by TorFX

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