Weaker USD from Chinese Trade Response pushes AUD/USD Exchange Rate Higher
The Australian Dollar to US Dollar exchange rate (AUD/USD) has risen by 0.5% today, following signs of an escalating economic conflict between China and the US.
Although this clash could catch Australia in the crossfire, for the time being the weak US Dollar has raised demand for the Australian Dollar.
On Australia’s side, there have been cautious statements from Capital Economics economist Kate Hickie, which have prevented further AUD gains.
Offering a mixed outlook on the Australian jobs market this year, Hickie has stated;
‘We expect that employment growth will remain above average through most of this year before easing to around 1.5% by the end of 2018 as the large gains in 2017 fall out of the annual calculation.
In other words, while we aren’t expecting the stellar performance of 2017 to be repeated in 2018, we aren’t expecting a sudden sharp deterioration either’.
US Dollar to Australian Dollar Exchange Rate Slides as Fears of Chinese Trade War Grow
The US Dollar has fallen by -0.4% against the Australian Dollar today, due to increasing concerns about the state of the US economy in the near-future.
Last week ended on an alarming note for US markets, when President Donald Trump confirmed that he was imposing tariffs on Chinese metal imports.
The Chinese government promptly responded in kind, announcing counter-tariffs on goods brought to China from the US.
Outlining their position, Chinese government officials said;
‘China doesn’t hope to be in a trade war, but is not afraid of engaging in one.
China hopes the United States will pull back from the brink, make prudent decisions, and avoid dragging bilateral trade relations to a dangerous place’.
Highlighting the problems posed by this rapid response, CNBC’s Jim Cramer warned that;
‘They are so ready for what we do, it’s embarrassing. Do you think that [China] has not figured this stuff out? They’ve got a game plan’.
Australian Dollar to US Dollar (AUD/USD) Exchange Rate Forecast to Fluctuate on Fed Speeches
The week’s first notable Australian economic event won’t be until the afternoon of 27th March, when Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent speaks.
Before then, the Australian Dollar could be influenced by statements from policymakers at the US central bank, the Federal Reserve.
Fed officials Randal Quarles, William Dudley and Loretta Mester will all be giving remarks on the day; Mester and Quarles will vote on US interest rate decisions in 2018.
The best case scenario for USD traders will be if all three policymakers speak in favour of a more rapid pace of US interest rate hikes over the rest of the year.
There are currently two US interest rate hikes priced in for 2018, following last week’s forecast-matching rate hike from the Fed.
If it seems that four total rate hikes could take place in 2018 then the USD/AUD exchange rate could rally.
On Australia’s side, if Assistant Governor Kent forecasts improving conditions in the Australian jobs market then the Australian Dollar could appreciate.