China's trade news couldn't have come at a worse time


That said, the currency has been relatively resilient all the way up until now as most of the negativity has been priced in. However, China could be a major tipping scale in terms of impacting the country's economic outlook as the decision to ban Australia's second largest export shows that China isn't messing around and that they are willing to hit Australia where it really hurts.

Here's what else the Australian dollar has going against it at the moment:

  1. High household debt, consumption continues to be weak
  2. Housing market continues to experience a downturn
  3. Inflation still flagging and going nowhere
  4. Wages growth aren't near levels needed to lift inflationary pressures
  5. Economic growth is starting to show signs of slowing down
  6. Global growth is also experiencing a slowdown, weaker sentiment

The only real thing that the currency has got going for it is a still-solid labour market as evident from the jobs report earlier. The other potential boost was supposed to be positive developments from US-China trade talks. However, if China is moving to lessen economic ties with Australia, then the aussie's benefit from a trade deal there is not going to be as great as one would expect before today's headlines.

Looks like Westpac's call for two rate cuts this year may not be too far off if things continue down this path over the coming months.