Aussie Bears See Drop to 60 Cents as Trump Readies China Tariffs

Bloomberg: The Aussie dollar has taken quite a hit lately, dropping the most it has in six years. Experts think it might even dip below 60 US cents soon.

Since late September, the Aussie has been struggling. Global risk sentiment is down, and there are growing worries that the Reserve Bank of Australia might have to cut interest rates. Plus, the looming trade war between the US and China isn’t helping, since China is Australia’s biggest trading partner.

Gareth Berry from Macquarie Bank mentioned that if US stocks react badly to the trade war, and if China’s economic measures don’t do the trick, the Aussie could slide all the way to 60 cents.

Last year, the Aussie dropped 9.2%, hitting a low of 61.79 cents on December 31. It managed to recover a bit, ending last week at 62.16 cents. If it breaks below 61.70 cents, it could hit its lowest point since the pandemic selloff in April 2020.

We might see a test of that 61.70 cents mark soon, especially if Australia’s inflation data comes in lower than expected. That could ramp up speculation about an RBA rate cut in February.

Richard Franulovich from Westpac noted that the RBA’s recent minutes hinted that their February decision is still very much in play. They’re considering easing up on monetary policy, and more data on the economy will be available by then.

Franulovich also thinks the Aussie could keep losing ground, possibly ending March around 61 cents. It’s been struggling to hold onto the 0.62 mark, and its failure to bounce back above 0.6275 keeps the focus on further declines.

Next week, there are some key economic events to watch, including Australia’s monthly CPI and retail sales, which could impact the currency even more.