Aussie dollar outlook glum as trade tensions and rate cut loom large

AUD - Australian Dollar

The Australian Dollars depreciation continued through trade on Friday as US and China trade talks deteriorate. Unsteady labour market data Thursday and waning optimism a compromise on trade may have been reached before June both weighed on the AUD forcing the dollar below 0.69 to touch intraday and year to date lows at 0.6860. The uptick in unemployment rates Thursday compounded recent softness across wage prices and inflation data and have amplified calls for the RBA to act and loosen monetary policy in a bid to stimulate lacklustre domestic economic performance.

Heightened US-China trade tension and growing concerns the global economy is failing to fire have weighed further on the domestic unit. As the US and China engage in a tit for tat tariff increase and the US look set on expanding it’s tariff agenda, albeit a decision on auto tariffs has been suspended for 6 months, the outlook for the AUD appears less than rosy.

Despite an uplift on open following the weekend election results the sustained period of range bound trade with supports above 0.70 appear to have broken and risks to the downside remain in play. Attentions now turn to the RBA policy meeting minutes Tuesday and ongoing trade talks for direction through the week ahead.

Key Movers

The U.S. Dollar outperformed key rivals through trade on Friday advancing against both the Euro and Pound. Concerns over European Parliamentary elections and Britain’s exit from the European union weighed on both currencies as investors looked to haven assets. While the Euro found some support in a commitment from President Trump to waylay the imposition of auto tariffs on Germany and Japan the combined unit failed to make any significant headway and opens this morning only marginally above 1.1150, while the GBP lodged its worst week for 2019 as Brexit talks broke down.

The GBP plunged to a four-month low as talks between Theresa May and Labour Leader Jeremy Corbyn broke down. May’s failure to advance a deal at home has dampened investors demand for the Pound and forced a move outside recently narrow ranges as markets begin to price in the likelihood of an exit without a deal. Sterling opens this morning only marginally above 1.27 having touched lows at 2.2701.

Expected Ranges

AUD/USD: 0.6830 - 0.6970 ▼

AUD/EUR: 0.6080 - 0.6220 ▼

GBP/AUD: 1.8310 - 1.8610 ▼

AUD/NZD: 1.0480 - 1.0580 ▼

AUD/CAD: 0.9130 - 0.9280 ▼