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Australian Dollar US Dollar (AUD/USD) Exchange Rate Sinks following US Huawei Crackdown

AUD/USD Exchange Rate Falls as ‘Greenback’ Traders Optimistic on Consumer Sentiment

The Australian Dollar US Dollar (AUD/USD) exchange rate is down today and is currently trading around US$0.6883 on the inter-bank market.

The US Dollar (USD) rose against the Australian Dollar (AUD) despite the increasing strains between the US and China following President Donald Trump’s announcement of a crackdown on the Chinese telecom giant, Huawei.

Senator John Barrasso has supported Trump’s actions on China, however, saying:

‘The President is right to hold China’s feet the fire on this. They wouldn’t be negotiating at all if it weren’t for what the President has done … The President has his own timeline. I support what he is doing.’

The ‘Greenback’ is also benefiting from rising hopes that the flash US Michigan Consumer Sentiment Index for May will increase today, with the consensus being that it will improve at 97.5 against April’s 97.2.

AUD/USD Exchange Rate Eases on Expected RBA Rate Cuts

The Australian Dollar (AUD), meanwhile, is struggling on fears that the Reserve Bank of Australia will cut rates next month, following Australia’s unemployment rates lifting in April.

Rodrigo Catril, a Senior Strategist at the National Australia Bank, commented:

‘The uptick in the unemployment rate means that, along with the additional weakening in forward looking indicators, the two necessary conditions for the RBA to cut have been met or we are now very close to meeting them.’

However, with Australia’s economy being so closely tied to China’s, the ongoing US-China trade tensions is proving a drag on the ‘Aussie’.

Today also saw China announce its scrapping of importing American pork, in the largest cancellation in over a year.

Dennis Smith, a commodity broker at Archer Financial Services, said:

‘It’s just disappointing that this trade war could drag on for months and that means more tariffs on pork. This should not be happening. We should be selling a lot of pork to China, because of [African swine fever].’

Australian Dollar US Dollar Outlook: US-China Trade Talks to Remain in Focus

Australian Dollar investors will be looking ahead to tomorrow’s Australian Federal Election, which will see the election of the new members of the Australian Parliament.  

‘Greenback’ traders, meanwhile, will be looking ahead to Monday’s publication of the US Chicago Fed National Activity Index figures for April, which are expected to ease at -0.33.

Tuesday will see a speech from the Chair of the Federal Reserve, Jerome Powell, and with any signs of dovishness following the recent trade tensions, this could weaken the USD/AUD exchange rate.

The AUD/USD exchange rate will remain sensitive to US-China trade developments, and with any signs of further disagreement between the two superpowers, this could diminish risk appetite and weaken the ‘Aussie’.