Commodity currencies – Australian and Canadian dollars – have steepened their decline provoked initially by falling crude oil prices, along with the greenback recovery. The additional bearish driver emerged following US President Donald Trump’s decision to impose major tariffs on steel and aluminum from other countries – 25 per cent and 10 per cent respectively. The bearish pressure has eased somewhat on Friday, though both currencies remain vulnerable to further losses amid potential negative trade developments.
It is so far unknown, whether Canada is on the list, but traders accelerates looney sell-off on the announcement yesterday evening. As Canada is the largest supplier of both steel and aluminum to the U.S., the risk for the country’s industry is high. Trump promised to impose tariffs next week, so in the short-term, the nervy traders will likely continue to short CAD, which reached fresh lows for 2018 around 1.2895 on Thursday and is now trading around 1.284.
The aussie also pressed the mid-December lows yesterday and touched levels barely above the 0.77 mark. Risks for AUD/USD are also bearish, considering that the Australian annual steel exports worth around $130 million. Besides, the growing fears of a real trade war between the US and China will inevitably put commodity currencies, including AUD, under a more intense pressure. With this in mind, the next downside goal for the aussie is the 0.77 level, while USD/CAD could test December highs above 1.29 on fresh signals from Washington.