Australian Dollar Outlook Grim on Fed RBA Rates Path

The Australian Dollar steadied in the fourth quarter. The bellwether AUD/USD exchange rate settled into a choppy range after finding support at decade lows in early August as ebbing concerns about US-China trade war escalation and a disorderly Brexit improved market-wide risk appetite.

Hopes for détente between Washington and Beijing seemed to be particularly potent. China is Australia’s top export market so it seems hardly surprising that the Aussie cheered the prospect that growth there would be buoyed by the conflict’s resolution, offering positive knock-on effects along the supply chain.

As 2020 dawns, some optimism seems to have been justified. Presidents Donald Trump and Xi Jinping are set to sign a “phase one” trade deal that includes limited tariffs rollbacks, increased Chinese purchases of US agricultural products, and early drafts of new intellectual property protection and exchange rate management frameworks.

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— Written by Ilya Spivak, DailyFX Research

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