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.
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
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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Senior Corporate FX Dealer
Phone Patrick – 0431 278 632
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