AUD/USD is moving in a range to 0.7275-80 during the Asian trading starting on Tuesday. The Aussie pair fell the previous day even as global markets remained dormant amid the US Labor Day Holiday. The reason can be traced from mild risk-off.
It can be also seen from the fears of a bearish RBA move. The rise in the US dollar also has an impact on this, based largely on the dismal performance of European data. Pair traders are waiting for a new impetus from the return of American traders.
The lack of fresh impetus appears to be tiring AUD/USD sellers despite geopolitical concerns helping them hold on to the throne. There is also the news that the US is preparing to blacklist Beijing's state-owned Semiconductor Manufacturing International Corporation (SMIC).
The Heat-up Condition
One more that creates the market fears was the Chinese Foreign Ministry's verbal retaliation against a US State Department spokesman. The Chinese Foreign Ministry slammed a US State Department spokesman for calling the so-called visa restrictions on US media in China.
It is because the spokesman said that it is a reciprocal measure against the Trump administration's suppression of Chinese journalists in the US. That statement was judged baseless. The US was like blaming others when he should blame himself.
Not only the Sino-American game but the India-China border situation is also getting tense and weighing on the market mood. As the latest news from CGTN, the Chinese military demands India to denounce its soldiers whom China says illegally crossed the Line of Actual Control (LAC).
That was stated on Monday and fired warning shots at Chinese border patrol soldiers. Elsewhere, upbeat Chinese trade figures were unable to please Aussie buyers and so was news from the Financial Review that Australian banks would be encouraged to fund government stimulus bills.
RBA Compliance and Its Effect
Furthermore, the RBA will soon comply with further Quantitative Easing (QE) and the rate cuts put additional pressure on quotes. Against this backdrop, the US dollar index (DXY) scored five straight days of gains as weakness in the euro ahead of the European Central Bank (ECB).
This situation added to the strength of traders' rush towards the greenback. Going forward, the National Australia Bank (NAB) Business Confidence and Business Conditions for Australia expected to be -22 and +2 versus -14 and 0 respectively. It can be a good condition for investors.
It will offer immediate direction ahead of US second-tier data which is likely to produce mixed results. However, market participants will be more concerned with risk events and how American traders respond to them for short-term directions that will be happened.
Meanwhile, USD is Bounced Back
The US dollar was trading higher in early European trade Tuesday, with sterling losing ground as uncertainty over a possible post-Brexit trade deal emerged. The Dollar Index, which tracks the greenback against six other currencies, was up 0.4% at 93.062.
Renewed negotiations between the EU and the UK on a potential trade deal will resume late Tuesday. However, Britain has threatened to undermine an exit agreement unless free trade terms are agreed on next month. Talks have been deadlocked for months over two main issues.
The Brexit is back and the sterling is not ready enough. The experts estimate that no risk premium is calculated into currencies, while speculative positioning is neutral. Both will facilitate this month's GBP slide as negative headlines are likely to gain traction.
UK-focused equity funds posted record outflows of 1.2 billion pounds ($ 1.58 billion) over the past three months. It is because the investors worried about a no-deal Brexit and the impact of the coronavirus pandemic. It was taken from the Calastone fund networking data on Tuesday.
