By guest contributor Stuart Talman, Director of Australian Sales, XE.com
Once again the Australian dollar avoided a break of 0.7000, finishing the week on an upbeat note as the US dollar had its worst week of 2019.
Locally, with momentum in economic growth clearly stalling and zero support from the monetary policy it seemed a foregone conclusion that a handle of 0.6900 would appear last week, however not the case as AUDUSD closed three-quarters of a percent higher at 0.7082.
The data flow out of the US has been soft of late – Friday evening bringing further softness in weak manufacturing data. With US factory output falling for the second straight month there is further evidence of a sharp slowdown in US economic activity.
And whilst the Aussie dollar currently faces headwinds from a shift in monetary policy expectations, the US dollar faces the same as the Federal Reserve adopts a “patience” stance toward lifting rates further.
The Fed’s patience along with a report detailing positive progress in US-China trade talks bolstered risk sentiment through the back half of the week. China’s state-run Xinhua news agency said that Washington and Beijing were making substantive progress on trade talks which did run counter to earlier news that a summit to strike a trade deal would no longer occur at month end.
Also adding to the positive risk backdrop was the UK parliamentary vote in favour of an amendment that rejects a no-deal Brexit under any circumstances. Prime Minister May will once again put forward her Brexit plan this week and whilst there is still much to work out, last week was an indication that markets are far more optimistic that a hard Brexit will not occur.