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“The consensus view is that AUD/USD will move higher this year, extending the choppy upward bias that was in place between October and December,” note Rabobank analysts.

Key quotes

“In view of Australia’s trade links, the AUD is sensitive to the growth outlook in China and it is likely that the market’s optimistic outlook on the AUD was drawn from the completion of the Phase 1 trade deal between the US and China. Additionally, it is likely assumed that the appearance of some better data releases in the US will lift global growth prospects and add a buoyancy to risk appetite. We see significant risks to this view based on both on international and domestic factors and continue to expect AUD/USD to end the year at weaker levels.”

“If consumer caution returns, there is a strong likelihood that the strength of the November retail sales data gives way to weak results for December and January. A poor month for consumers could be compounded by the impact of bush fires and smoke pollution. It is not wholly unsurprising that surveys indicate that consumer confidence dropped into the start of this year.”

“Another risk for the Australian economy and the AUD is the potential for trade tensions between the US and China to rise again – impacting the outlook for Chinese growth. An economic impact from China’s coronavirus could also have negative implications for the AUD. Even if the RBA decides to stand pat on policy on February 4, the door for further easing is likely to be left wide open. We see risk of AUD/USD dropping toward 0.65 on a 12 month view.”