AUD Slumps Under Weight of US Trade Tariffs
AUD
The Aussie Dollar opens lower against the major currencies, following the announcement of Trump’s ‘Liberation Day’ tariffs earlier this morning. The largest victim of the unveiled news was China - with tariff rates set at 34% - causing a sell-off of the AUD due to our close trade ties with the Asian manufacturing juggernaut. Whilst stocks had a quiet day yesterday, equity markets are set for a battering today signalled by the S&P500 futures which are currently down 3.8% since the tariff announcements. No major economic news due locally today, focus will be firmly on the trade war developments with the potential of Australia lodging a complaint against the USA at the WTO looking more likely.
USD
The AUDUSD opens lower at 0.6243, having initially surged to 0.6341 this morning before falling to current levels as the tariff news was digested by markets. President Trump unveiled fresh tariffs, initially starting with a 10% baseline on all countries including Australia. This was lower than expected, however the additional reciprocal tariffs on China and Europe erased hopes of less restrictive trade policies. Canada & Mexico were unscathed in this round of tariffs, however the result looks particularly bad for the Asia region which doesn't bode well for AUD. Wall Street was volatile, eventually finishing down with S&P500 posting losses of 1.65% which look likely to extend further into the week with soft futures trading as we go to print. To the non-tariff related happenings, and ADP Non-Farm Employment Change released last night showed 155k new jobs created, beating expectation by 33% and indicating that the American job market was improving. Added to the strong inflation data from Friday and the "rates higher for longer" story is gathering strength. Tonight will see further economic news out of America, with their Unemployment Claims and Services PMIs.
EUR
The AUDEUR opens at 0.5760, dropping from last night’s highs of 0.5844 as the AUD continues to lose friends on a deteriorating global trade environment. On equities, the DAX closed up 0.7% and CAC -0.2%. No major economic news was released last night out of the Eurozone and it will be a quiet week outside of an assortment of light manufacturing and services data. Europe has yet to announce any reciprocal tariffs after today’s fresh tariffs, however US President Trump has promised no further tariffs if Europe does not implement any more either. Services PMIs are due for release from Europe tonight but markets are more keenly anticipating the tariff response.
GBP
The AUDGBP opens at 9 year lows of 0.4798, dropping from yesterday’s highs of 0.4883. The English economy continues to strengthen as markets remain optimistic due to the new economic and monetary policies announced this year. There’s been no economic news this week out of England, however PM Keir Starmer mentioned that UK’s first response ‘should not be to jump into a trade war’. Tomorrow will have English Construction PMI, which is expected to improve from last month’s readings.
NZD
The AUDNZD opens slightly lower at 1.0963, losing the 1.1000 handle after trading in and around that level this week. The NZD has faced less pressure from the tariffs than Australia due to their decreased trade links to China and US export exposure. Today will have ANZ Commodity Prices m/m at 11am, and no further news for the rest of the week.