(03 APRIL 2019)DAILY MARKET BRIEF 2:Aussie in demand as risk-on sentiment shows up

The Australian dollar is changing course of action as Chinese Vice Premier Liu He and his delegation is resuming trade talks in Washington in order to agree on an enforcement mechanism. Sticking points remain on topics such as intellectual property and trade surplus reduction. Furthermore, recent economic releases and hopeful statements made by the Australian government on a budget plan to help low- and middle-income classes ahead of general elections helped the Aussie to recover from RBA’s neutral outlook.

Indeed, the RBA maintained its monetary policy unchanged, with its cash rate at 1.50% and put emphasis on the downside risk for global growth during Tuesday monetary policy meeting. Yet the surprise came from February trade balance ticking at AUD 4.8 billion ($ 3.4 billion), its highest historical level thanks to a rise in resource, metal ores and minerals which largely offset the decline in coal amid Chinese import reduction. In addition, February retail sales at 0.80% (consensus: 0.30%) suggests that the Australian economy is doing great considering that personal consumption accounts for more than half of Australia’s GDP while unemployment rate is lowest in 7 years.

We therefore remain optimistic that a rebound in AUD/USD is feasible in the future, as supportive measures for the Australian economy as well as an improving Chinese economy should support the pair during 2Q 2019. Currently trading at 0.7119 (+1% year-to-date), AUD/USD is heading along 0.7130 short-term.