The Australian dollar is gaining as trade optimism grows

President Donald Trump and China’s President Xi Jinping, (Thomas Peter – Pool / Getty Images)
  • The Australian dollar gained ground on Friday, helped by firmer commodity prices and gains in global stocks.
  • Trade optimism and a denial from China that it was deliberating targeting Australian coal imports were the main catalysts behind the gains.
  • The economic calendar is quiet today. Usually that means the performance of Chinese markets will be influential on movements in the Aussie.

The Australian dollar moved back above the 72 US cent level on Friday, helped by broad-based strength in commodity prices and strong gains in global stocks.

Optimism that trade negotiations between the US and China are moving towards a lasting resolution, along with a denial from China that it is deliberately targeting Australian coal imports entering the country, were the main catalysts behind the Aussie’s push higher.

Those gains have been sustained in early trade on Monday morning.

Here’s the scoreboard at 8am in Sydney.

AUD/USD 0.7138 , 0.0011 , 0.15%
AUD/JPY 78.99 , 0.12 , 0.15%
AUD/CNH 4.7866 , 0.008 , 0.17%
AUD/EUR 0.6290 , 0.0005 , 0.08%
AUD/GBP 0.5462 , 0.0012 , 0.22%
AUD/NZD 1.0411 , 0.0017 , 0.16%
AUD/CAD 0.9374 , 0.0012 , 0.13%

After closing Thursday’s session at .7092, the AUD/USD rose to as high as .7150 in European trade, gaining ground on continued optimism towards US-Sino trade negotiations.

“US President Trump said Friday there was ‘a very good chance’ the US would strike a deal with China to end their trade dispute and that he was inclined to extend his March 1 tariff deadline and meet soon with Chinese president Xi Jinping,” said Ray Attrill, Head of FX Strategy at the National Australia bank.

“Chinese Vice premier Lui He in Washington for the talks and attending Trump’s press conference agreed that there has been ‘great progress’ and that from China’s perspective it is ‘very likely that it will happen and we hope that ultimately we’ll have a deal’.”

Trump told reporters that he would probably would meet with Xi in March in Florida to decide on the most important terms of a trade deal.

The positive remarks helped to propel commodity prices and stock prices higher, the latter helped by a reduction in expected US stock market volatility in the month ahead.

The trade headlines were not the only thing working in the Aussie’s favour with China rejecting earlier reports that it had banned coal imports from Australia at the Northern Chinese port of Dalian.

China foreign ministry spokesman Geng Shuang said in a news conference Friday that the reports were “false”, according to Bloomberg.

Geng said that, “based on my information the ports in China are all receiving declarations for imported coal, including that from Australia”. He did acknowledge that Chinese customs were “stepping up efforts to analyse and monitor the quality and safety of imported coal”.

After rising to as high as .7150, the AUD/USD eased lower into the close, eventually closing the session at .7127, a gain of 0.5%.

Investing.comAUD/USD Hourly Chart.

Other commodity-linked currencies also performed well for the session, led by the New Zealand dollar that recovered smartly after tumbling heavily in Asia on the back of renewed speculation over potential rate cuts from the RBNZ.

Turning to the session ahead, there’s little on the economic calendar in Asia on Monday to whet the appetite of traders, an outcome that should see headlines, technicals and sentiment dictate broader market direction.

The main highlight comes from New Zealand with the release of Q4 retail sales volumes at 8.45am AEDT.

While that could lead to short-term volatility in the Kiwi and Aussie, one suspects that the performance of Chinese financial markets, particularly the Chinese yuan, will prove to be influential on both in the second half of Asian trade.

The economic calendar is also quiet in European and North American trade with no major releases scheduled.

On the central bank front, Mark Carney of the BoE and Richard Clarida of the Fed will be in action.

The Bank of Israel will also announce its February monetary policy decision — in the past many used to regard it as being a lead indicator for future policy decisions from the RBA. No change is expected.

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