by Nicholas Cork
The RBA minutes yesterday did the AUD no favours as the board noted that the scenarios for a rate cut or a rate hike were now evenly balanced… “Members noted that there were significant uncertainties around the forecasts, with scenarios where an increase in the cash rate would be appropriate at some time and other scenarios where a decrease in the cash rate would be appropriate. Moreover, the probabilities around these scenarios were now more evenly balanced than they had been over the preceding year, when an eventual increase in the cash rate had appeared more likely.” The AUD spent the rest of the session sliding towards 71 cents before early a.m. trade news sparked a sharp recovery in the Chinese yuan which dragged the AUD along for the ride. The catalyst was a report that said the US is pressing to secure a pledge from China that it will not devalue its yuan as a part of a trade deal, which saw the yuan trade at a two week high. A hinted potential extension to the trade talks deadline also aided sentiment as Trump said, “They are very complex talks. They’re going very well, I can’t tell you exactly about timing, but the date is not a magical date. A lot of things can happen.” So anyway, that was seen as a good sign from Trump as he then moved on to show a softening in his stance towards North Korean denuclearization, saying “I’m in no rush. There’s no testing. As long as there is no testing, I’m in no rush. If there’s testing, that’s another deal.”
In other news, the Global Dairy Auction showed a 6th consecutive gain in prices paid in USD overnight, the 6th rise in a row which is a real positive for sentiment, but was however slightly under expectations and the AUDNZD appears to be building some support around the current 2 year lows at 1.0350/1.0400.
The local markets should open with some buoyancy as the DOW finished slightly higher, with investor sentiment lifted by upbeat results from Walmart as they post their strongest holiday quarter over 10 years, boosted by higher grocery and e-commerce sales. They also said they saw no signs of weakness in U.S. consumer spending, which is in direct contrast to the recently released and shockingly weak US Retail Sales. The GBP rallied overnight as employment data was better than expected, but won’t be enough to sustain any real strength until Brexit is sorted.
AUD starts today above 0.7150 which is a technically strong close for the chartists, and a further push towards 72 cents cannot be ruled out.
AUD and YUAN rise in tandem (Reuters)
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