Global Risk Aversion Sends the AUD/USD Exchange Rate Lower

AUSD/USD Slides as President Trump Threatens Further Trade Tariffs

The Australian Dollar to US Dollar (AUD/USD) exchange rate suffered grave losses heading into the last trading hours of Friday.

The interbank AUD/USD exchange rate weakened to $0.71.

The main catalyst for the Australian Dollar’s losses was diminishing risk appetite in investors thanks to the continuing threats by US President Donald Trump as he exchanged more threats of tariffs against the Asian economic giant, China. Currently, Trump is planning to place another 267bn (billion) of tariffs on Chinese exports into the United States of America.

“With further large-scale U.S. tariff measures imminent, Chinese exporters will be hit hard and China’s GDP growth rate in 2019 is likely to be dented,” said Rajiv Biswas, Asia Pacific chief economist.

Chinese Tariffs Keep Australian Dollar (AUD) Exchange Rates Under Pressure

Australia’s exports rely heavily on the production and manufacturing of Chinese exports, therefore the Australian economy is speculated to contract depending on the contagion effect of these proposed tariffs.

“Export growth could decelerate to 5 to 10 percent over the next few months, then slowing more next year on a high base, trade tension and a broad slowdown of the global economy,”

Larry Hu, a Hong Kong-based economist at Macquarie Securities Ltd., wrote in a note Monday.

“The US-China trade tension is escalating given the talk from President Trump last Friday.”

AUD/USD Following the ASX200 with a Four-Day Sell-Off

The Australian Stock Exchange (ASX) list of the top 200 companies (commonly referred to as the ASX200) has fallen dramatically over the last 4 trading days. When this occurs it typically relates to the aforementioned risk preference change in the equity markets.

Along with the pending trade war with China, the downward move was also caused by a growing concern in the emerging markets with Argentina, Turkey, and Indonesia showing signs of economic strain.

Australian Dollar (AUD) at Weakest Levels Since 2016

The Australian Dollar (AUD) has recently fallen to the lowest levels since the start of 2016, at 0.7114. The pressure is set to remain on AUD/USD until the release of the Australian employment figures, due out on Thursday at 11.30 AEST.

The employment figures this month are expected to show expansion as current market expectations are that 18,400 jobs were added to the Australian economy and the unemployment rate remained at 5.3%.

Considering the previous figures showed a loss of 3900 jobs, this figure might just be what the Australian Dollar needs to push higher against the US Dollar this week.