China’s one sided trade war not enough to dent AUD upside

Daily Currency Update

AUD - Australian DollarEquities and risk assets enjoyed renewed support through trade on Tuesday, recouping losses suffered on Monday as market sentiment rebounded. Optimism a no-deal Brexit will be avoided, hopes a US fiscal stimulus program is just around the corner and reports Moderna’s COVID-19 vaccine will be approved for rollout by the FDA next week all helped bolster risk demand driving gains across key equity markets and dragging the AUD higher, having edged back toward 0.75 US cents throughout the domestic session as markets digested reports. China has formally banned the import of Australian coal; however, the AUD rebounded strongly overnight recouping losses to extend back through 0.7550. The AUD remains well-supported at present as risk demand, long-run US dollar weakness and commodity prices underpin recent gains. Markets have largely set aside the efforts of China’s one-sided trade war, with no real sustained impact on AUD value evident at this point. However, as tensions continue to escalate and key commodities now in focus this could pose a risk to long run AUD upside. Our attentions today remain with the current drivers behind the risk narrative, and we expect the AUD to maintain the current upturn and bounce between 0.7480 and 0.7590.