- Antepodens governed in a realm of geopolitics as a key driver.
- RBA, Aussie GDP and ongoing trade war headlines to dominate the cross.
AUD/NZD has been trading in a phase of consolidation sub the 1.08 hande following a prior failure. At the time of writing, the cross is trading at 1.0744 having travelled between a low of 1.0735 and a high of 1.0755 on the session so far.
We are entering a realm of geopolitics as a key driver at the moment. The Aussie has been highly correlated to the equity markets which were mixed on Friday but the concerns around the Sino-US relationship and weak US consumer sentiment has been weighing on risk appetite.
US-China tensions running high
AUD has been otherwise able to track positive performances on Wall Street as well as commodities. The energy sector continues to lead the complex higher, although it is expected to struggle in a trade war situation. The ramifications for financial markets could be enormous should the US and China get into a tit for tat exchange of response to a war of words.
The question is how far Trump will go having already removed Hong Kong's favoured status and further deteriorating the relationship with China. With US-China tensions running high, there are upside risks for USD/CNY and USD/CNH and therefore weigh on AUD. In fact, we have already seen the value of the CNY weaken vs. the USD which has raised concerns that China could be weaponising its currency to support external trade.
RBA Preview: Not enough to kick-start anything in AUD/USD at make-or-break levels
Looking ahead for the week we have the Reserve Bank of Australia as well as Aussie Gross Domestic Produce. Expectations are for the data to decline for the first time since 2011. But there is a lot more uncertainty than usual this time, reflecting the huge forces impacting the economy.