AUD caught between two forces
- On one hand the AUD has been supported by the gentle optimism that a US-China phase 1 trade deal will get done.
- On the other hand the AUD is under pressure from a growing expectation of coming rate cuts. Although the RBA was more hawkish than expected at the last rate meeting, the recent data since then has been negative. Q4 GDP data showed a weak reading and retail sales data has disappointed. Weak consumer confidence data yesterday suggests that any positive effects from the Gov't tax cuts may have dissipated now. Westpac and RBC are both projecting rate cuts and Westpac projecting 25bps rate cut at their February 04 meeting. Check out Justin's excellent post here on some of the headwinds facing the AUD.
So, when trading the AUD, keep these two forces which act as a push and a pull on the AUD firmly in your minds. The larger outlook for the AUD remains bearish at the moment until we get a significant shift in either the domestic situation or the US-China trade war
