Jane Foley, head of FX strategy at Rabobank, suggests that given its geographical position and its trade links, the AUD is often traded as a proxy for Chinese growth.
Key Quotes
“Although a Phase 1 trade deal between the US and China is thus positive for the AUD, the risks associated with its implementation and the potential that a phase 2 deal may never be signed are not.”
“Slowing economic growth in Australia and the determination of the government to return a budget surplus suggest that there is the risk of further rate cuts from the RBA in 2020 and, when rates reached a floor of 0.25%, QE is likely to be invoked. While there may be some initial respite for the AUD, we see risk of renewed downside pressure on AUD/USD during 2020.”
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