Richard Franulovich, Head of FX Strategy and Sean Callow, Senior Currency Strategist, at Westpac offer their thoughts on the US-China trade truce and what it means for the fx markets.
Key Quotes:
“The Trump-Xi G20 meeting looks to be a modest win for China and a positive for risk assets short term but well within the range of expected outcomes.
The agreement looks lopsided: China has returned to the negotiating table by committing to more farm goods purchases, which they likely already wanted to make. It also sounds a lot like the Buenos Aires G20 pledge in late 2018 which didn’t prevent the US administration this year from subsidizing US farmers hurt by the US-China trade war.
Thornier national security issues around forced intellectual property transfer, IP theft and state subsidies are likely to be addressed in upcoming talks.
A comprehensive deal is likely to remain elusive.
Pricing for a 50bp Fed rate cut in July should be unwound further, while AUD/USD remains capped by a likely RBA easing this week.”
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