By guest contributor Stuart Talman, Director of Australian Sales, XE.com
Looking at the weekly result (down just ~0.20%) for the Aussie dollar, one might assume that it was a benign week’s trading.
It was anything but as the local currency embarked on a wild ride through Thursday afternoon and early Friday morning, hammered almost 2% off the week’s high point.
Trade continues to be the central theme for global markets with Australia very much front and centre as a Reuters exclusive hit the news wires, late Thursday afternoon, reporting that China’s Dalian port had implemented a ban of Australian coal imports.
Earlier in the day the local jobs data release came in strong with 39k new jobs (vs 15k expected) and the unemployment rate holding steady at 5.0% – lifting AUDUSD back through 72 US cents and poised to test key resistance at 0.7240. Bust as quickly as the Aussie dollar bulls piled into the post-employment number trade, the bears were set to stage a stunning reversal.
The first catalyst for this reversal being Westpac (WBC) announcing itself as the first of the big four to call for RBA rate cuts later this year.
Immediately following the jobs data, WBC is now calling for 25bps cuts for both August and November. Bill Evans stating:
“We have revised down our GDP growth forecasts for 2019 and 2020 from 2.6% to 2.2%. With the slower growth profile, we now expect to see the unemployment rate lift to 5.5% by late 2019. That makes a strong case for official rate cuts to cushion the downturn and, in turn, meet the RBA’s medium-term objectives.”
Tagging the week’s high at 0.7207 immediately after the jobs data release, WBC’s shifting rates view put the Aussie dollar well and truly on the back foot, however, it was the Reuters story that really emboldened the bears.
In a week that was expected to yield positive outcomes regarding US-China trade progress, the initial reaction to the Dalian port import ban was that the Chinese authorities were seeking retribution for the Australian government’s decision to ban Huawei from taking part in the rollout of the 5G mobile infrastructure.