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Jane Foley, Senior FX Strategist at Rabobank, notes that the AUD has made substantial gains against the USD on a 1 day view with oil price surge clearly being a crucial driver, in addition to the boost received from an easing in the trade tensions between the US and China following the weekend meeting between Presidents Trump and Xi.  

Key Quotes

“On the first instance a reduction in trade tensions between the US and China should produce a reprieve for the outlook for Chinese growth. This is good news for Australian producers.”

“Australia may not be a major oil supplier but, after Qatar, it is the world’s second biggest exporter of LNG.”

“While the short-term outlook for the AUD has improved on the back of the hope that Chinese demand will increase on the back of the weekend’s trade truce, over the long term Australia should be wary of Trump’s trade deals.”

“The December 4 RBA policy meeting is the next major focus for the AUD. Steady policy is expected but the market will be interested to see if recent strong Australia employment data has shaken policy makers out of their cautious position.   That said, with wage growth still subdued, we expect steady policy through 2019 and would look to fade rallies in AUD/USD ahead of the policy meeting.   We would expect the AUD/USD0.74 level to offer strong psychological support.   The 200 day sma is at 0.7418.”