Collinson FX: September 10, 2018 - AUD crashes

Another island - another wind shadow to negotiate - Hamilton Island Race Week - Day 6 © Richard Gladwell

Collinson FX: September 10, 2018 - US/China trade war hots up

Equity markets closed the week softer, with the growing US/China Trade war looming, as Trump confirms over $200 Billion tariffs are ready to go. German Trade numbers were lower, as exports faded, while GDP growth was static. The EUR fell back to 1.1550, while the GBP broke above 1.2900, ahead of key Central Bank announcements. The ECB and Bank of England are both scheduled to announce rate decisions. The ECB has indicated an end to QE, although it will be some time before interest rates rise, but data will need to continue to improve. The Bank of England has been closer to rate rises in an attempt to combat growing inflation. The U.K. Is still mired in ‘Brexit’ negotiations, which buffet the currency.

Apart from the ECB and Bank of England, the Feds Beige Book will be released, no doubt confirming the strong economic performance. The RBA has some officials out publicly speaking, following the battering the AUD has taken recently, but are unlikely to alter monetary policy. Wholesale funding costs are rising, with Banks all pushing up mortgage rates, which is sending tremors through currency markets. The AUD has crashed to trade around 0.7100, reflecting the exposure to high levels of household debt and static income growth. The China/US Trade war is heating up, with the trade exposed nations like Australia and NZ extremely vulnerable, thus adding further downward pressures to the currencies.