AUD/USD consolidates above 0.69 the figure during US/Chinese signing ceremony
- AUD/USD holds in the 0.69 handle as the US and Chinese signing ceremony takes place with no surprises.
- Focus will now get back to the Federal Reserve and Reserve Bank of Australia.
AUD/USD is currently trading at 0.6913, the highs of the day, following a steep trip up from the lows of 0.6877 as the US/Chinese signing ceremony takes centre stage on the day.
We have seen a bid in the Aussie which has corrected from a low in the 0.6850s where it reached 0.6919 earlier in the week due to improved risk appetite with the equity market making record highs along with a pickup in key commodity prices.
We have not heard the exact details of the trade deal between the US and China as of yet, as President Donald Trump introduces the phase one signing of the deal, speaking in general of it. However, we heard yesterday that rollbacks in tariffs will not be part of it, so it is unlikely that we can see much more upside in purely based on the deal at his stage.
Central banks back in focus
The focus will now be back to the US economy and the Federal Reserve. It is too soon to speculate, but the Fed is tipped to hold rates throughout the year, although barring an unexpected negative shock to the economy, inflation pressures will be a thing in 2020, stemming from a positive U.S. output gap which could result in a less dovish rhetoric, potentially supporting the US dollar. However, the benign Consumer Price Index release, rates have been a little lower and the US dollar a little softer this week.
As for the Reserve Bank of Australia, the bush fires and damage to the economy could be a catalyst to bring a rate cut forward where a cut from 0.75% to 0.50% in February would pressure the Aussie. "The RBA’s 2.8% growth forecast for 2020 seems very optimistic (we are on 2.1%, consensus 2.3%)," analysts at Westpac explained noting that "markets price only a 45% chance of the RBA cutting next month."