Commentary via Westpac on the Australian dollar, one to three month view:
Q4 2019 included two key positive developments for global risk appetite
- the Brexit deal breakthrough
- and the US-China "Phase One" trade deal
This was enough for the Aussie to reach highs since July.
Domestically, Australia continues to print trade surpluses and iron ore's 3-month highs are backed by a bounce in copper prices (coal remains a weak spot). Yet 0.6950 did not give way and it is easy to imagine US-led trade tensions returning in 2020.
Most importantly, we expect the RBA to lower its Australia GDP forecasts and cut the cash rate in February, an outcome only about 50% priced.
- The Aussie should continue to meet sellers with a 0.69 handle over year-end, with risks below 0.67 on anticipation of or delivery of a February cut
