The trade war looming between the US and China is bound to have a profound effect on the Australian dollar and we may see some significant losses after tomorrow’s events.
China is Australia’s biggest trading partner and the tariffs due to be introduced tomorrow by the US government on China is expected to send shock waves through the world financial system with riskier currencies such as the Aussie dollar expected to suffer
Even the Australian Federal government is weighing in on the Argument by noting that Australia would not be dragged in to trade wars but this is likely to have little influence on the situation as it unfolds.
“It is of concern and Australia will continue to advocate for free and open trade and investment because that is of great benefit to our country and free trade has benefited the world. It is a position that we have made very clear to our American friends and will continue to promote free and open trade and investment.” Noted Australian Foreign Minister Julie Bishop
Another casualty of the trade war is the perception that an interest rate hikes from the reserve bank of Australia will be delayed even further which is only going to add to the woes of the Aussie dollar.
Some analysts say it has completely removed the chance of a rate hike from the RBA this year.
"The Reserve Bank of Australia is in no hurry to tighten monetary policy, especially in the current environment, with fears of a looming trade war between the US and China. says Georgette Boele, a senior FX strategist at ABN Amro.
“We therefore no longer think it is likely the RBA will hike interest rates in 2018, and now expect policy to remain on hold this year. We maintain our forecast for two 25bp rate hikes in 2019," he added.
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