AUD to be hardest hit from US-driven trade tensions - Westpac

Should the US-driven trade tensions deepen in the months ahead, AUD is likely to be one of the currencies hardest hit, given Australia’s current account deficits and its heavy reliance on China for commodity exports, suggests Sean Callow, Research Analyst at Westpac.

Key Quotes

“But AUD has been resilient during this month's tensions, suggesting that the very bullish global growth narrative is yet to be really shaken. More tangibly, China’s industrial production growth was well above expectations in Jan-Feb.”

“Still, the fall in key commodity prices since early March should be watched and is weighing on AUD fair value estimates.”

“Domestically, jobs will be the key next week and expectations may be boosted by the further strength of business conditions – see chart. The lukewarm US$ should keep AUD/USD from spending too much time below 0.7800 but 0.7940/50 should cap given equity and commodity jitters.”