AUD Outlook Looks Optimistic Amidst Recent China Comments and Federal Reserve Meeting

Things were looking up for the Australian dollar yesterday as positive comments from China concerning the trade war drove up the confidence, boosting the AUD. Alongside this, the Federal Reserve (Fed) meeting which took place may have aided sentiments towards the global economy but with the Fed taking a backseat after recent interest rate cuts this could spell bad news for the AUD.

US-China Trade Deal Looks Promising Once More but Trump Refuses to Budge

Since its beginning, the ‘Phase One’ trade deal between the US and China has been rocky to say the least. Several ups and downs have been experienced with each country wanting the best deal possible for themselves. News broke yesterday which highlighted that Chinese Vice Premier Liu He is taking a cautious but optimistic approach to the potential trade deal. He mentioned that China is looking for a deal which would at least end the current conflict between the two countries. A positive deal would fare well for the AUD as it is closely linked with the Chinese economy.

President Trump however looks to shake up the optimism as his recent comments about the trade deal seemed indifferent. He mentioned that despite the progress going “very nicely” with China that the US is taking in billions of dollars as things stand and he admitted that he felt China were not stepping up to the level he would have hoped for. Another comment made by Trump following a tour of the Apple Manufacturing Plant in Austin; ‘We are dealing with China. I have a great relationship with President Xi. They’re a great country, but we’re a greater country than China’ is likely to ruffle a few feathers and sent pessimism sky-rocketing.

Federal Reserve minutes released

The minutes from the meeting that took place yesterday revealed that sentiments expressed in Congress last week were widely held on the Federal Open Market Committee (FOMC) of rate settlers. The Committee came to a consensus that the US monetary policy is “well calibrated” and thus will go forth in taking a material reassessment of the outlook to change that. The near-term driver for the USD will be its deal with China, this would likely support the Dollar outlook which could boost the global economy, benefiting other currencies like the AUD too.

The Federal Reserve hinted that its rate cutting cycle appears to be over for now but this gives way to the ebb and flow of trade-related headlines to be the biggest drivers of currency markets in the time to come. This may not be positive news for the AUD as it is approaching a ‘resistance level’ on the charts which suggests an uphill struggle is ahead, even at the best of times for the Australian Dollar.

Feel free to email me, Dayle Littlejohn if you would like to know more on the factors affecting the AUD/GBP pairing or have an upcoming currency transfer drl@currencies.co.uk.

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