AUD/USD directionless, in a chop around the 0.65 handle
- AUD/USD can't hold a bid nor an offer and oscillates around 0.65.
- The sentiment is mixed pertaining to COVID-19 lockdowns.
- Trade wars are becoming a theme again, weighing on the Aussie.
- US CPI to keep the US dollar under pressure into 2021.
AUD/USD is currently trading at 0.6493 and sat between a range of 0.6432 and 0.6536. AUD/USD has been in a chop and undecided as to what to make of the rise of trade wars, both between China and the US and now China and Australia.
ABC reported that "in a move that's been dubbed by many as an escalation of Beijing's trade war tactics, China has imposed a ban on beef exports from four Australian abattoirs, citing issues with labelling and health certificate requirements."
This blacklisting comes just days after China flagged plans to introduce an 80 per cent tariff on Australian barley, which would bring the trade to its knees.
Meanwhile, China's Global Times has been pretty actively stoking the flames of trade wars of late and has said that some advisers are pushing for Beijing to tear up January's Phase 1 trade deal with the US. This led to United States President Donald Trump saying that he is opposed to renegotiating the US-China "Phase One" trade deal. Trump has also expressed considerations to abandoning the pact signed in January. Trump told a White House press briefing earlier this week that he wanted to see if Beijing lived up to the deal to massively increase purchases of US goods.
Aussie Business conditions fell to -34 in April
Meanwhile, there had been measures to combat the spread of COVID in Australia, mostly introduced through the second half of March. Consequently, the economy has suffered and the NAB business survey conducted from April 23 to 30 weighed on the Aussie yesterday as well. Business conditions fell to -34 in April, having declined to -22 in March, from an already weak starting position of 0. This is well below the GFC low, -16.6, and is approaching the early 1990s recession low, -38.8.
US CPI sinking fast
The US Consumer Price Index slowed sharply in April. This was not of a surprise but with the all items index posting its largest monthly decline since the 2008-09 recession, it points to a real possibility that the headline rate will fall below zero YoY in Q2 and Q3. This will mark the worst period of disinflation since the 2008-09 recession. This is significant as lower for longer inflation, into 2021, will keep the Fed in stimulus mode for an extended period and the US dollar under pressure.
AUD/USD levels