Market Update – 6th August 2019 – Markets Get Whacked Again As Trump Trade War Escalates

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

Everything Whacked: 

Its been a horrendous start to the week, equity markets across the globe declined Friday but then had another whopping bad session last night. In fact, U.S equities had there worst falls of the year down as much as 3.5% as China retaliated to Trump’s increased tariffs. China vowed to cease all agricultural purchases from the U.S which is likely to have dire consequences for many of Trump’s biggest supporters. The AUD has not fared much better and is now trading in the 0.67’s vs. the Greenback and 0.55 vs. the GBP. Our local market is tipped to open 3% lower after losing yesterday and most of last week.

Cash Rate Decision: 

The RBA meet again today as they do on the first Tuesday of every month however no change to the benchmark rate of 1% is expected given we had a 25 basis point cut just last month. More interestingly, expect the RBA to comment on the recent market turmoil, and the impact on growth that Trump’s trade war will have on the local economy. The RBA may even telegraph further cuts for later in the year, so a bit of danger for importers this morning. Exporters need not worry, the AUD is low across the board which is supporting business, but certainly hedging a portion of future exposures would be wise.

Expect A Bounce:

As is always the case when we see such a significant increase in volatility and risk aversion a bounce in equities, the AUD and commodities is never too far away, particularly in such a low rate environment globally, where investors have to chase yield.

AUD EXCHANGE RATES:

AUD/USD – 0.6734

AUD/GBP – 0.5534

AUD/EUR – 0.5985

AUD/NZD – 1.0254

AUD/JPY – 71.189

OTHER MARKETS:

All Ords (XAO) – 6,710

Gold – A$2,178/oz

Silver –  A$24.38/oz

WTI – US$54.11/barrel

DATA RELEASES TODAY:

AUD – Trade Balance at 11.30am

AUD – Cash Rate and Accompanying Statement at 2.30pm

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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