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Temporary optimism in trade dispute supports the AUD

Published August 27, 2019

Author: Dennis Li

Speaking alongside US President Trump yesterday at the G7 summit in southwest France, French President Macron said his country and the US have reached a “very good agreement” on France’s digital tax. Meanwhile, the British Prime Minister Boris Johnson also shared his Brexit plan with the rest of the G7 leaders saying he was prepared to take Brexit talks with the EU down to the very last minute before the 31st Oct exit deadline and a ‘no deal’ decision would be made on that day if necessary.

Overnight, we saw US stocks recover some of the losses from last Friday after President Trump said his negotiators had received a series of phone calls from Chinese officials asking to restart trade talks on Sunday while China’s Foreign Ministry denied it. The temporary optimism in the markets also supported the AUD broadly across other major currencies with both the AUDUSD and AUDEUR pairs recovering all losses made since last Friday.

As the September monetary policy meeting approaches, RBA governor Phillip Lowe has indicated that he does not believe further cuts will do much to help the economy due to global political uncertainty. Investors will continue to monitor the development of the latest escalation of the US-China trade dispute this week as there is a lack of market moving data until US Q2 GDP is released on Thursday.