AUD acting like a tariff risk barometer - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, suggests that the AUD has tended to act more as a risk barometer for China and tariffs in recent months. 

Key Quotes

“Falling significantly, even as its domestic economy strengthened to be growing more consistently above-trend in the last year, further reducing spare capacity in the labour market and bringing the RBA closer to a date when it might consider raising interest rates.”

“If you cover one eye, the Australian economy is on a road to normalization, and the AUD might seem cheap.  Part of that apparent strength is the stability in Australian export prices.  Chinese steel production has remained relatively sold despite a gradual slowing in the Chinese economy.  The most recent Chinese residential property market activity has gained momentum, supporting the outlook for steel demand.”

“Chinese infrastructure activity has been falling surprisingly fast this year, but observers, including the RBA, expect China to ramp-up infrastructure investment to help support the economy.”

“Growth risks from tariffs may encourage policymakers in China to use fiscal and monetary policy to boost domestic demand, supporting import demand from Australia.  It is possible to construct a favourable scenario for the AUD notwithstanding the larger more sustained threat to China’s economy and financial markets arising from US trade policy.”