Australian Dollar Declines on China’s Data, Trade War Fears

The Australian dollar fell today after negative macroeconomic data from China and signs that the United States and China are close to starting a full-blown trade war.

The Caixin China General Manufacturing PMI dropped from 51.6 in February to 51.0 in March. The drop was totally unexpected to economists, who were counting on an increase to 51.8.

Staying with the theme of China, the Asian nation announced a tit-for-tat response for the US tariffs on country’s goods. China introduced tariffs of up to 25% on 128 US products. While trade wars are expected to be negative to basically all world’s economies, the Australian economy is especially vulnerable as it is heavily dependent on trade with China, therefore any negative consequences to the Asian economy are likely to translate to the Australian economy as well.

Traders wait for a policy announcement from the Reserve Bank of Australia scheduled for 4:30 GMT tomorrow, though they expect the central bank to stay passive and make no changes.

AUD/USD dropped from 0.7690 to 0.7672 as of 13:11 GMT today. EUR/AUD rallied from 1.6009 to 1.6078. AUD/CHF declined from 0.7325 to 0.7314 after rising to the daily high of 0.7343 earlier.

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