Lower demand for risk and weak domestic data is producing a mixed picture in the Australian and New Zealand Dollar on Wednesday. Both currencies were affected by a series of tweets from U.S. President Donald Trump on Tuesday, indicating he’s ready to impose tariffs if a U.S.-China deal can’t be reached, but investor sentiment was lifted when China’s commerce ministry sounded more upbeat. The Aussie was hit following the release of disappointing third-quarter economic growth.
Tweets from President Trump fueled a volatile reaction by the Aussie and Kiwi on Tuesday. Trump said in several Twitter posts that negotiations with China have begun. Calling himself a “Tariff Man,” the president threatened to slap more tariffs on China if efforts to strike a trade deal with Beijing crumble.
Earlier today, Trump was at it again, tweeting, “We are either going to have a REAL DEAL with China, or no deal at all – at which point we will be charging major Tariffs against Chinese product being shipped into the United States. Ultimately, I believe, we will be making a deal –either now or into the future….” He added later, “China does not want Tariffs!”
Trump’s comments were somewhat softened after China’s Ministry of Commerce said in a statement on its website that the weekend meeting between Trump and Chinese President Xi Jinping was successful. The ministry also said the two countries will push ahead with negotiations within 90 days, and Beijing will work to address issues agreed upon as quickly as possible.
“The economic and trade teams of the two sides will actively promote the consultation work within 90 days in accordance with a clear timetable and roadmap,” according to a translated response to questions by the ministry’s press spokesperson.
The comments produced whip-saw action in both the Aussie and the Kiwi.
The AUD/USD is under pressure on Wednesday after investors pushed potential rate hikes by the Reserve Bank of Australia further into the future in the wake of disappointing third-quarter economic growth. Economists expect the central bank to keep the cash rate on hold at 1.5 percent until at least the fourth quarter of 2019.
Earlier today, the Australian Bureau of Statistics said Australia’s gross domestic product (GDP) expanded 0.3 percent in the three months through September from the prior quarter, and 2.8 percent from a year earlier. Economists had expected 0.6 percent growth on quarter and a 3.3 percent on-year increase. One economist said there is more weakness to come.
“It would be tempting to blame the slowdown in GDP growth in the third quarter on temporary factors. But we believe that the full effects of falling house prices and tighter credit conditions haven’t been felt yet and we expect GDP growth to slow further next year,” said Marcel Thieliant, senior Australia and New Zealand economist for Capital Economics.
This article was originally posted on FX Empire
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