The Aussieappears to be trading as a gauge of the markets’ global recession fears. The AUDUSD is frequently chasingwider benchmarks of market-wide sentiment trends, like major stock indices.
This is due to Australia’s gearing to commodity exports and to China, its biggest overseas market and itself a cornerstone in the global supply chain. The system makes the local business cycle relatively sensitive to changes in the global one. This resonates into policy expectations, yields and the exchange rates.
Fears about a global recession have worried investors in recent weeks. Growth forecasts have been slashed as brisk monetary tightening arrives alongside potent parallel headwinds. Covid-containment lockdowns have stalled growth in China while the war in Ukraine continues to stoke geopolitical uncertainty.
The average estimate for global GDP growth in 2023 from a survey of economists polled by Bloomberg fell from 3.5 to 3.2 percent – a change equivalent to about US$25 trillion – in the second quarter of this year. The Australian unit shed over 9 percent over the same period, despite a concurrent hawkish pivot at the RBA.
Warning:
Trading on CFDs involves a high level of risk, including full loss of your trading funds. Before proceeding to trade, you must understand all risks involved and acknowledge your trading limits, bearing in mind the level of awareness in the financial markets, trading experience, economic capabilities and other aspects.
Disclaimer:
Market Trends, Charts, Trading Ideas or other information provided by BKFX (Pty) Ltd and/or third parties are not intended as an investment advice and/or recommendation. The information provided is not presented as suitable or based on your specific need. You are responsible for your own investment decisions and you should not trade with money you cannot afford to lose. Any views or opinions presented in this Article are solely those of the author and do not necessarily represent those of the Company, unless otherwise specifically stated. The Company may provide the general commentary which is not intended as an investment advice and must not be construed as such. Seek advice from a separate financial advisor if an investment advice is needed. The Company assumes no liability for errors, inaccuracies or omissions, inaccuracies or incompleteness of information, texts, graphics, links or other items contained within this article/material.