Australia Posts Large, but Shrinking, Trade Surplus in February, Australian Dollar (AUD) Exchange Rates Fall
The Australian Dollar to US Dollar (AUD/USD) exchange rate plummeted on Thursday, finally shedding recent gains as investors switched to the ‘Greenback’, which was recouping losses thanks to easing fears of a trade war with China.
Beyond this, however, were concerns over the recent dovish Reserve Bank of Australia (RBA) rate decision and Australia’s latest trade balance reading.
According to the Australian Bureau of Statistics, Australia’s trade surplus dropped to A$825m in February, down from the previous period’s A$952m and the forecast of A$725m.
This decrease was largely due to declines in the export of transport equipment and various other manufactured goods, but ultimately, after account price effects are taken into consideration, real exports and imports both increased by 2.5% in Q1.
This means that net exports shouldn’t add, or detract from Australian GDP.
US-China Trade War Fears Recede – US Dollar (USD) Exchange Rates Rally
The US Dollar clawed back its losses on Thursday, supported by the possibility that the United States and China might still find common ground on trade.
According to top US Economic Advisor Larry Kudlow, there is still a chance that the US won’t need to apply its proposed tariffs, as long as China lowers its trade barriers and better handles its questionable use of US intellectual property.
In his mind this is simply part of the negotiation process, with both sides attempting to gain better leverage, and not evidence that the US is on the cusp of starting a global trade war.
‘You know, there are carrots and sticks in life, but he is ultimately a free trader. He’s said that to me, he’s said it publicly. So he wants to solve this with the least amount of pain’.
Beyond this, China’s own proposed tariffs would only affect some 0.3% of US GDP, ultimately making their measures largely negligible.
Because of this the stock market has seen a quick recovery, with the US Dollar largely following suit.
Australian Dollar US Dollar (AUD/USD) Exchange Rate Forecast: US Employment at the Forefront
Lacking much in the form of Australian ecostats the focus tomorrow will likely shift to the US employment sector, especially after today’s rather mixed US jobless claims figures.
According to the US Labour Department, continuing US jobless claims dropped to their lowest levels since 1973 in March.
New applications for unemployment benefits increased by 242k, however, higher than the previous period’s 218k rise.
Tomorrow’ investors will assess the US wage growth and unemployment readings in an attempt to better ascertain the strength of the US employment sector, and with a fall to 4.0% in unemployment, the outlook is currently rather positive.
If this does indeed occur, or if wage growth rises, then the US Federal Reserve could also be pushed towards making 4 rate hikes this year, rather than the initial plan of 3.