AUD/USD takes on the highs of the day, soaking up trade-deal optimism

AUD/USD has taken off in the hourly charts, rallying to a fresh high of the day up at 0.6892 from a low of  0.6848 on a move that has left the 21,50 and 200-hour moving average for dust. 

The Federal Reserve eased rates by 25bps as expected this morning. This takes their policy rate to 1.50% - 1.75% while the rate now paid on excess reserves fell to 1.55% (from 1.80%) following the cut. There has been a mixed market reaction to the Federal Reserve cutting interest rates again and Fed governor Powell's presser statements. Initially, the US Dollar was bid on the statement and decision to cut rates, a combination that made for a hawkish rate cut. Indeed, Powell said that today's cut in interest rates was insurance against ongoing risks. 

"Interestingly, unlike previous statements the Federal Reserve has offered a more neutral statement to the market on this occasion. The Federal Reserve highlighted the moderating growth environment and despite a pullback in non-farm payrolls remains optimistic on the US jobs market," analysts at ANZ Bank explained, noting that the financial markets struggled to find much direction after the decision was announced, with the USD paring back initial gains.

Trade deal optimism supportive of AUD

Meanwhile, the markets are somewhat bullish with respect to trade-deal optimism between the US and China. The summit in Chile, due to the troubles there, has been cancelled, however, markets were fed optimistic statements from both nations that this should not prevent a deal from going to contract. 

Australian CPI in line with expectations

The Aussie Consumer Price Index was in line with expectations and helped to support a more positive outlook for the currency in the near term – The Reserve Bank of Australia, while remaining on the dovish side, will not need to be overly cautious on the next meeting around so long as the CPI remains above 1.5%. However, this is still way below the bottom of the RBA’s target band. "Our preliminary estimate for December quarter CPI is 0.5%qtr /1.7%yr for headline and 0.5%qtr/1.6%yr for the trimmed mean," analysts at Westpac explained. 

AUD/USD levels