Market Update – 7th May 2019 – AUD & Equities Rocked By Trump Tariff Tweets, RBA Cash Rate Today

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.

Trump Tweets:

Yesterday morning Trump tweeted that he would be raising tariffs on “US$200 billion of Chinese goods to 25 percent from a base of 10 percent because talks on a deal with China were moving too slowly”. The result of the surprise comments saw a swift decline in risk assets (namely equities and the AUD) and a swift move towards safe havens like bonds, the USD, Gold and the Japanese Yen. This morning things haven’t much improved and markets are still on the back-foot as a result of Donald Trump’s tweets formally being backed up by comments overnight from the U.S. Trade Representative Robert Lighthizer.

All in all, we’ve had a swift change in rhetoric from the Trump White House who were for one minute saying how close they were to a trade deal with China only to seconds later say they aren’t any closer and are therefore increasing tariffs. This demonstrates the real susceptibility of the AUD to outside/global factors and reiterates why it is just so important for importers to take advantage of the AUD on any rallies.

RBA Cash Rate: 

Ahead today is a couple of further big data events. Retail sales first this morning and then the RBA meet to discuss the current setting of interest rates. As it stands the official benchmark interest rate is 1.5%, but the market is betting on a 50% chance that we see a cut today to 1.25% as a result of continued sluggish growth. So while it’s no certainty that a rate cut is forthcoming this afternoon, it would certainly make sense for importers to book payments ahead of the announcement at 2.30pm. Additionally retail sales figures at 11.30am, could provide some indication as to whether or not the RBA does anything this afternoon. A very weak result will up the likelihood of a cut, while a positive result will reduce that chance. Call me if you’d like to discuss.

AUD EXCHANGE RATES:

AUD/USD – 0.6955

AUD/GBP – 0.5305

AUD/EUR – 0.6209

AUD/NZD – 1.0542

AUD/JPY – 77.003

OTHER MARKETS:

All Ords (XAO) – 6,369

Gold – A$1,831/oz

Silver –  A$21.32/oz

WTI – US$62.56/barrel

DATA RELEASES TODAY:

AUD – Retail Sales m/m & Trade Balance at 11.30am

AUD – Cash Rate & RBA Rate Statement at 2.30pm

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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