With respect to AUD/USD, Greg Gibbs, the founder, Analyst, & PM, amplifying Global FX Capital Pty Ltd an Australian financial services company in an article in The Wire argued that the clear and present danger is President Trump's tariffs.
"The market has been bracing itself for US tariffs on an additional USD200bn of goods (on top of 25% tariffs already imposed on USD50bn of goods in "industrially significant technologies").
We are still waiting on these next USD200bn of goods, but Trump knocked Asian currencies down a peg on Friday by saying he is ready to impose tariffs on a further USD267bn of goods, for a total over USD500bn, which basically means all of Chinese exports to the USA.
Nothing is certain beyond the first USD50bn in tariffs. In early August, Trump said he was considering a tariff rate on the next USD 200bn tranche of 25%, up from an initially proposed 10%. The rate, the volume, and the timing are still up in the air, but like a dark cloud, they hang over the global economic outlook, especially that of China, and the USA, whose consumers will face higher prices for many goods.
There may even be a relief rally in the AUD if Trump reverts to a 10% rate or applies them to less than USD 200bn of goods. But the market can see that Trump has set his sights on China's trade and industrial policies, and there is no easy middle ground for the two sides in this trade dispute.
The fact that the AUD dropped harder and faster than other Asian currencies on Friday is a testament to its position as a liquid and flexible proxy for the Asia region."
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