China Levies Tariffs on US Goods – USD Slides, AUD Exchange Rates Profit
The Australian Dollar to Euro (AUD/EUR) exchange rate proved remarkably resilient on Tuesday, rallying against the Euro despite a dovish decision from the Reserve Bank of Australia (RBA).
This performance was largely due to the current weakness of the US Dollar (USD), with news that China has applied tariffs on US goods deemed evidence of worsening trade relations and a possible threat to the US economy.
It should be stressed, however, that China’s tariffs have been discussed for some time and only target near $3bn in US goods; very small measures in comparison with the US tariffs that target $60bn in Chinese goods.
Nonetheless, the markets tend to abhor any form of trade intervention and news that China is targeting the US agricultural sector was enough to send the more skittish USD investors scrambling.
With the US Dollar down, demand returned to the Australian Dollar once more, with markets seemingly confident that it would hold up better than its US counterpart.
RBA Keeps Interest Rates on Hold – AUD Exchange Rates Surprisingly Unperturbed
Markets might be distracted by the current weakness of the ‘Greenback’ but bubbling beneath the surface is some rather cautious sentiment in light of the RBA’s recent dovish rate decision and minutes.
Unsurprisingly, the RBA decided to keep interest rates on hold at the latest meeting, with bank Governor Philip Lowe arguing that ‘low levels of interest rates are continuing to support the Australian economy’.
Beyond this, the minutes also revealed concerns regarding the state of global trade relations, with a global trade war still liable to curb global growth and potentially hurt the ‘Aussie’ Dollar.
Because of this (and ongoing wage growth concerns), analysts do not expect the central bank to move for a rate hike anytime soon, an outlook that could limit the Australian Dollar’s performance in the weeks to come.
Eurozone Inflation and Unemployment in the Spotlight – What can we Expect for the AUD/EUR Exchange Rate?
The Australian Dollar to Euro (AUD/EUR) exchange rate could encounter volatility tomorrow as markets react to the latest Eurozone inflation estimate and the bloc’s latest unemployment figures.
Markets are currently expecting the inflation estimate to print at 1.4% in March, higher than the previous period’s 1.1% reading.
Whilst this would be a step in the right direction for the European Central Bank (ECB), it is still drastically below the target range and thus, unlikely to push them towards hawkish policy measures.
Beyond this, the Eurozone’s unemployment rate for February is expected to print at 8.6% – a result that could also keep the ECB away from a hawkish move.