Trump Protectionism Prompts Rise in AUD USD Exchange Rate
The Australian Dollar US Dollar (AUD USD) exchange rate rose on Monday as markets reacted negatively to Donald Trump’s inauguration.
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US Dollar (USD) Weakened by Trump Concerns
The US Dollar fell at the start of the session in reaction to Trump’s inauguration speech last week, as investors worried that his protectionist rhetoric will weaken the US economy.
Those who had been hoping that Trump’s first speech would help provide some clarity on his economic plans were equally disappointed as he left markets in the dark about how he plans to implement his ambitious stimulus policies. As Kit Juckes, global strategist at Societe Generale SA, explained;
‘There wasn’t enough about fiscal policy, tax cuts and infrastructure spending in President Trump’s inauguration speech on Friday, instead the message was combative, protectionist and isolationist.’
Trump also sparked further concern overnight as he reportedly plans to renegotiate the NAFTA trade deal in his first day of office. Investors will be looking closely at the outcome as it may give some indication on how he plans to deal with other trade agreements, such as those involving China.
Slump in Iron Ore Weighs on Australian Dollar (AUD)
The Australian Dollar briefly slipped on Monday evening as iron ore fell for the fourth consecutive session, pinning prices below $80 a tonne.
Iron ore fell off yesterday as China -its main export market- began to slow production ahead of the New Year celebrations at the end of the week.
This added to concerns last week that planned rebar production cuts in China could also hamper demand.
AUD USD Forecast: US Policy Announcements to Dictate Movement
The direction of the AUD USD exchange rate of the coming days is likely to be heavily reliant upon policy announcements by the new Trump administration as markets wait to hear more about how the new President plans to deliver on his campaign promises.
Should markets calm down by Wednesday then the Australian Dollar may rise further as domestic inflation is predicted to have risen from 1.3% to 1.6% in the fourth quarter.
Current Interbank Exchange Rates
At the time of writing the AUD USD exchange rate was trending around 0.75 and the USD AUD exchange rate was trending around 1.31