Australian dollar slightly changed
The Australian dollar has risen slightly Monday, buying 69.96 US cents from 69.94 US cents on Friday.
Last Friday, the local currency had inched ahead as investors dared to hope the Sino-US trade standoff would somehow be resolved even as higher tariffs seemed inevitable.
The Aussie also weathered a dovish policy outlook from the Reserve Bank, which signalled lower interest rates might be needed to get the jobless rate down further.
The central bank also cut its forecasts for economic growth and inflation, citing a weak housing market and subdued consumer spending as major drags.
“We reiterate our new base case, which is the Bank delivers 25 basis-point cuts in both August and November to one per cent,” said Annette Beacher, chief Asia-Pacific macro strategist at TD Securities.
“The RBA will still be monitoring monthly updates of the unemployment rate, but at this stage setting up for a cut in August.
“However, should the labour market rapidly deteriorate, the first cut could be brought forward to July.”
The Aussie dollar was still trading 0.2 per cent firmer at 70.04 US cents in part because the market has already priced in almost two rate cuts for this year.
Futures imply a 90 per cent chance of a quarter-point cut in the 1.5 per cent cash rate by August, and a 66 per cent probability of a further move to 1 per cent by December.
Yields on three-year bonds are likewise well below the cash rate at 1.280 per cent and only just above their all-time trough. Bond futures held near record highs, with the three-year contract steady at 98.745 and the 10-year off one tick at 98.2650.
Overshadowing domestic policy was the showdown in Washington where US Trade Representative Robert Lighthizer and US Treasury Secretary Steven Mnuchin were to hold a second day of talks with Chinese Vice Premier Liu He.
Before they get back around the table, the United States will have increased duties on $US200 billion of Chinese goods to 25 per cent from 10 per cent.