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Title : Australian Dollar Outlook Worsens Due to Impact of US-China Dispute
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Australian Dollar Outlook Worsens Due to Impact of US-China Dispute
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The AUD / USD currency pair had hit a record high of 0.6757 in today's Asian session (8/10), but dropped dramatically back to the range of 0.6729 at the start of the New York session. The Aussie was again affected by the US-China trade dispute, because Washington put 28 Chinese companies on the blacklist. The Kangaroo currency outlook has worsened ahead of the release of consumer sentiment data tomorrow morning.
Earlier today, the US Department of Commerce announced that it had put 28 Chinese commercial organizations and government agencies on the same blacklist as Huawei, for alleged human rights violations in Xinjiang. This news is feared to trigger increased tensions between the US and China, even though the delegation of the deputy levels of the two countries had just begun negotiations again earlier this week.
As an export-based nation's currency, the Australian Dollar has been affected by news of the escalation of the conflict. The current trade war has greatly contributed to China's economic slowdown, even though the Panda country is one of the biggest sources of export demand from the land of kangaroos.
"The AUD is particularly sensitive to China's economic outlook due to the strong trade relations (of the two countries) and its relationship to the global growth outlook due to the relationship (AUD) with commodities. While AUD / USD will continue to respond to news related to China, we continue to expect a downward bias to dominate, "said Jane Foley, a leading forex expert from Rabobank. He continued, "We are monitoring the potential for further decline in AUD / USD towards 0.65 within a 9 to 12 month time frame."
From within the country, market participants will monitor the Australian consumer sentiment report published tomorrow. If domestic consumer sentiment deteriorates amid a decline in external demand, the Australian central bank (RBA) has the potential to ease monetary policy further.
Elias Haddad from the Commonwealth Bank of Australia (CBA) explained, "The Australian Consumer Confidence Index published by Westpac for October is the next domestic focus, (because) the main focus of the RBA is the consumer spending outlook. Thus, a slump in consumer sentiment could result in a more significant downward revision in Australian interest rate expectations as well as weighing on the AUD. "
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