The Australian Dollar has surprised many over the festive period, with a sharp rise as the year comes to an end. Increases in both Aussie shares and gold prices have combined to see that the currency finishes the year strong. Optimism in the US-China trade deal has helped to boost the AUD as both parties agree a deal is to be signed shortly. Australia is set to benefit from the deal as one of China’s biggest trading partners.
Chinese Manufacturing Could Help AUD
The market is awaiting December’s Chinese manufacturing PMI which is set to be released later this week. Should the PMI show an uptick the China-sensitive AUD is likely to benefit. Last month’s Chinese industrial profits showed a smaller decline than was predicted with a -2.1% decline on the year, but the impact of this data was not enough to sway the Australian Dollar at all. Investors will be hoping for a greater resilience within the sector from this month’s data release. AUD may find further support from the Chinese economy as market risk appetite picked up sharply in the fourth quarter, to the benefit of Aussie exchange rates.
AUD Could Be Muted in 2020 by RBA Cut Decision
As AUD heads into the new year, many investors are still expecting to see a rate cut from the RBA. In recent meetings, the Reserve Bank of Australia began to shift towards a more dovish policy outlook. Economists are suggesting that as long as an interest rate cut from the RBA is plausible due to under performance of the economy, then AUD will likely be muted going into 2020, limiting potential gains going forward. Investors will be hoping that December’s finalised Australian manufacturing PMI sees an improvement in order to tip the scales in favour of AUD to finish the year.
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