AUD / USD pair rate: 0.70
Today, the Australian dollar collapsed to almost two-year lows. The last time the pair tested the 71st figure was in November-December 2016. In general, the AUD/USD pair is in the framework of a pronounced southern trend, which begins in February this year. The monthly timeframe clearly demonstrates a descending movement, starting from the height of the 80th figure. Within six months the pair lost their positions on a monthly basis, losing almost a thousand points as a result. Having renewed the annual minimum, the pair has stalled its decline, but tomorrow, the southern trend can get a new impetus.
Let me remind you that in the beginning of August, the “next neighbor” of the Australian – the New Zealand Dollar, reacting to the rhetoric of the Reserve Bank of New Zealand. The regulator has shifted the timeframe for a possible rate hike for 2020, while permitting a softening of monetary policy conditions. Now, traders fear that the Central Bank of Australia will follow the example of its colleagues and will also take a “dovish” position in this matter.
However, the rhetoric of the RBA in recent years was not “hawkish” nature, although the regulator members admitted that the rate will be increased rather than vice versa. Only the question – when. By the general market expectation, the Australian Central Bank will consider this issue in the second half of next year, but recent events of a fundamental nature allow doubting this. Therefore, if tomorrow the RBA at its September meeting allows a variant of deviation from this scenario, the Australian dollar will continue to drive down the entire market.
If we talk about the immediate causes of the weakening of the “Aussie” at the beginning of the trading week, then it is all about the macroeconomic statistics. Data on the volume of retail sales is worse than forecasted, although experts predicted growth to 0.3%. This indicator fell on many months’ lows, disappointing traders, especially on the eve of the RBA meeting. In addition, the volume of the operating profit of Australian companies also declined to 2% after growth to 6.5%. This indicator, in general, is very minor, but also contributed to the atmosphere of nervousness.
In other words, the Australian statistics released today served as a catalyst for the decline of the AUD/USD pair. The main reason is the fears of traders regarding the softening of RBA rhetoric at the September meeting. After all, apart from weak retail sales, there are other bigger large-scale problems, which the regulator can pay attention to. It is about reducing the commodity market and the development of the US-China trade conflict.
Actually, these problems are directly connected with each other. As soon as there was information that Donald Trump could introduce new duties on Chinese imports (now worth $ 200 billion), the commodity market tipped down. In particular, the cost of copper for the first time this year fell below six thousand dollars per ton (to date – $ 5,886). The cost of zinc, lead and aluminum are also reduced. The most important raw material for the Australian economy, iron ore, follows the general trend and fell to $65 per ton.
Here it is worth noting that the reason for the weakening of the commodity. There were no official statements of the White House on this matter. Although Beijing reacted to unconfirmed information quite harshly. According to a representative of the Middle Kingdom, a new package of trade-related duties will be equal to an aggressive act against China. Such rhetoric of Beijing surprised traders, as Trump’s intentions were voiced only in the American press, with who allegedly became aware of this information. It can not be said that the commodity market has been reacted to, not even to the insider from the White House, but to the reaction of official China.
In any case, the events of recent days show that before the “truce” between the US and China is still far away and even if non-public talks on resolving the conflict are ongoing. Their results leave much to be desired. By the way, according to some analysts, China will not take any practical steps to rapprochement with Washington before the elections to the US Congress. which will be held on November 6, after which the political configuration in the United States can significantly change. It is likely that Trump is precisely for this reason trying to force events, putting pressure on the Chinese.
However, for members of the Reserve Bank of Australia, the subtext of current events is not so important as the degree of their negative impact. Given a rather pessimistic fundamental background, the Australian regulator can indeed soften his rhetoric. In this case, the Australian dollar will finally consolidate within the 71st figure, with the subsequent intention to test the basic level of support for the pair at 0.70.