Analysts at Westpac suggest that in the last week or so that momentum has started to build towards their 0.68 year-end target for the AUD/USD pair.
“The sharp deterioration in trade relations between the US and China in the second week of May that saw Trump raise tariffs on $200bn of imports from China from 10 to 25% and order his trade representative, Robert Lighthizer, to start work on raising tariffs on all remaining imports was one factor pushing the A$ below 0.70.”
“However, the other was RBA guidance on the Australian economy. A week ago, the RBA cuts its forecasts for growth and inflation to barely acceptable levels despite making the technical assumption of two rate cuts in its forecasts.”
“Clearly then, it would not have been pleased to see the unemployment rate in Australia pop up to 5.2%, though there may have been some comfort in another month of robust job creation, with a headline 28k boosting annual jobs growth to 2.6%, and full-time jobs up 2.9%yr.”
“On Tuesday we see the minutes from the May RBA policy meeting but the key for AUD should be 45 minutes later when RBA Governor Lowe speaks on the “Economic Outlook and Monetary Policy.” Traders will be watching this speech for any guidance on how quickly rates will be cut, with money markets fully pricing a move by July and 80% for June.”
“The Australian dollar has fallen 2.2% so far this month and is the worst performing G10 currency over that period. However, it’s not been all bad news for the A$ outlook.”
“The ratcheting up of tariffs on Chinese goods, the retaliatory tariff increases by China and this action on the Huawei have materially hardened the dialogue between the two superpowers. Consequently risk and growth sentiment are likely to be suppressed in the near term. This is a weight on AUD/USD though whether the pair tests the 0.6800 area probably depends more on what Governor Lowe has to say.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.