AUD/USD marks fresh highs for the day ahead of key risk events
|- AUD/USD has been elevated on trade deal hopes and global economic data.
- US manufacturing data misses the market and contracts deeper.
- Chinese manufacturing data springs back to life, propelling AUD higher.
- Markets will turn their attention to the RBA and Aussie GDP this week.
AUD/USD has been carving out a strong run to the upside at the start of the week. AUD/USD has reached a high of 0.6822, rising over 0.90% from a low of 0.6761 as bulls hunt down the 4-hour moving average at 0.6833. However, the Aussie is enjoying what could equate to be a shortlived bid should the mixed trade-deal sentiment kick in and/or pending domestic events which may take a turn for the worst.
It has been an eventful start to the week in global financial and commodity markets with a number of factors playing out. Firstly, we should remember that markets had been in a state of consolidation thanks to the US Thanksgiving holidays that started to take effect towards the end of last week. A series of trade-deal antagonistic themes filtered through following the signing of the Hong Kong bills by US President Donald Trump. However, given the lack of liquidity in the FX space, we may not had seen the full market reaction to them at the time and prices were relatively robust, despite the potential negative ramifications for trade deal progress between the US and China.
Instead, we have seen a move in the Aussie quite to the contrary at the start of this week due to a series of good news from the Chinese economy and its manufacturing sector and the complete opposite from the US manufacturing data. The US ISM manufacturing index fell 0.2pts to 48.1 in November – a negligible decline, and pushed lower by weakness in employment (46.6 vs 47.7) and new orders (47.2 vs 49.1). Nonetheless, it was the fourth consecutive month below 50.
China: Manufacturing PMI back in expansion territory – TDS
Looking ahead, we have the Reserve Bank of Australia and Aussie Gross Domestic Product to look forward to. Bulls might be inclined to take a moment to pause into these events which could make for a bout of profit-taking, especially should the bearish trade-deal sentiment start to kick in and take effect. Indeed, the commodity complex is not looking particularly favourable, despite the more positive Chinese data. Copper prices, for instance, which are seen as a barometer for the global economic health, are off over 0.30% today so far and AUD is usually positively correlated to base metals.
Focus will be on the RBA’s final cash rate decision for 2019
The market's consensus expects the RBA to keep the cash rate on hold at 0.75% considering Wednesday's GDP is still to come out providing no compelling reason for the RBA to jump and cut ahead of the release.
We expect the RBA to cut the cash rate to 0.5% in Feb’20,
Analysts at TD Securities argued.
The markets have factored in just a 10% chance of easing at the December meeting, yet with a terminal rate of 0.40% while the RBA's cash rate is currently at 0.75%.
Meanwhile, Australia's GDP figures are forecast to show a small slowing in growth from last quarter, with growth printing at 0.3% QoQ and annual growth slowing to 1.5% YoY - not a bullish case for the nation's battered currency.
AUD/USD levels
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