Outside of its very modest steel and aluminium exports to the US, Australia is yet to be directly significantly touched by US President Donald Trump’s tariffs. Even if/when reciprocal tariffs come into effect next month, Australia could face only modest tariffs based on its tariff differentials with the US. But, it is the tariffs that the US is levying on China that matters for the AUD. The AUD remains a proxy trade for the CNH, so the additional 10% US tariffs to go into place against Chinese imports on Tuesday matter to the AUD. Our China economist and EM Strategist do not expect Chinese authorities to rapidly depreciate the CNY in order to offset the impact of Trump’s further tariffs. Instead, China has been placing its own restrictions on US imports as well as conducting an anti-trust probe into Alphabet. This has not prevented the AUD weakening on the back of news about Trump’s tariffs, however.
The coming days risk escalation in the US-China trade war and therefore presents further risk for the AUD. The AUD will also be watching China’s NPC, the announced growth target for 2025, which our China economist expects to remain the same as 2024 and at “around 5%”. Investors will also be watching see if there are any additional fiscal stimulus measures or loosening of restrictions on China’s technology companies that could further boost the recovery in China’s equities, which is helping support the CNY and indirectly the AUD.
Tuesday sees the release of the RBA Minutes and Australian retail sales data for January. The RBA decision to cut rates in February was a close call, according to RBA Governor Michele Bullock. The central bank’s SMP also suggests the RBA remains a reluctant rate cutter. Indeed, Bullock emphasised that allowing for the two further 25bp rate cuts the Australian rates market had priced in at the time of the cut would leave Australia’s trimmed mean inflation running at 2.7% and above the centre of the RBA’s 2-3% target band, which is the central bank’s ultimate goal. The Australian rates market is pricing in a bit more than 50bp worth of rate cuts by year-end and so a hawkish set of RBA Minutes would likely lend to the AUD support.
Australian retail sales data will also be important for the currency. Income tax cuts and government cost-of-living measures have been helping household consumption recover in H224. This recovery has been less than the RBA expected. The retail sales data have also been distorted by the seasonality of the Black Friday and Cyber Monday sales. The January retail sales data will be the first reading in several months without these distortions and therefore important.
The coming days risk escalation in the US-China trade war and therefore presents further risk for the AUD. The AUD will also be watching China’s NPC, the announced growth target for 2025, which our China economist expects to remain the same as 2024 and at “around 5%”. Investors will also be watching see if there are any additional fiscal stimulus measures or loosening of restrictions on China’s technology companies that could further boost the recovery in China’s equities, which is helping support the CNY and indirectly the AUD.
Tuesday sees the release of the RBA Minutes and Australian retail sales data for January. The RBA decision to cut rates in February was a close call, according to RBA Governor Michele Bullock. The central bank’s SMP also suggests the RBA remains a reluctant rate cutter. Indeed, Bullock emphasised that allowing for the two further 25bp rate cuts the Australian rates market had priced in at the time of the cut would leave Australia’s trimmed mean inflation running at 2.7% and above the centre of the RBA’s 2-3% target band, which is the central bank’s ultimate goal. The Australian rates market is pricing in a bit more than 50bp worth of rate cuts by year-end and so a hawkish set of RBA Minutes would likely lend to the AUD support.
Australian retail sales data will also be important for the currency. Income tax cuts and government cost-of-living measures have been helping household consumption recover in H224. This recovery has been less than the RBA expected. The retail sales data have also been distorted by the seasonality of the Black Friday and Cyber Monday sales. The January retail sales data will be the first reading in several months without these distortions and therefore important.
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tradingview.com/v/yDFPnb1J/
2. Signal Performance:
thedailyfx.com/performance/
3. We provide Free TradingView Premium and Essential Membership.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.