AUD: Uncertainty looms over RBA policy - AmpGFX

Greg Gibbs, Analyst at Amplifying Global FX Capital, explains that the AUD is weaker in line with emerging market currencies in recent weeks and faces direct risks from the protectionist trade policies of the Trump administration; including pressure directly on China to reduce steel production and more broadly on Chinese trade policies.

Key Quotes

“AUD also faces risks from Chinese policy aimed at tightening up on loose lending practices in its shadow-banking sector.”

“Australian economic growth has been running above potential, supported by infrastructure spending and stronger global growth.  Business confidence has been well above average for some time, and the RBA is witnessing a gradual return to full employment and a rise in wage and inflation growth from low levels.”

“However, risks to a sustained recovery also come from a weaker housing market that continues to face headwinds from rising bank funding costs, political uncertainty ahead of the national election early next year, and pressure on the financial sector arising from the Royal Commission into its misconduct.”

“These considerations are making the timing of any rate hike much more uncertain.”