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Heading North


Modi, AMLO Top Major Economy Leader Poll, Macron Last


Under Pressure


Trend Condition Remains Bearish

FOREX: Westpac note that "AUD has posted sharp gains against almost all Asian
currencies over the past 3 months, including 14% against the Chinese yuan,
though it has lost momentum recently. Global risk appetite, best proxied by
major equity indices, remains the main driver of gains for the risk-sensitive
Aussie. But Australia's outperformance in Covid-19 containment has also helped,
keeping the RBA's balance sheet expansion in check. China's economic recovery
remains focused on industrial activity rather than the consumer, but such a mix
of course benefits Australia, whose iron ore exports to China underpin ongoing
trade surpluses. We believe China is on track for a robust recovery, set to
finish 2020 with growth of around 3-4% and then 5.5-6% over 2021. The yuan has
been supported by the PBoC not opting for the ultra-expansionary monetary policy
of most central banks and by global travel restrictions which shrink China's
services deficit. Policymakers are choosing currency stability over export
competitiveness. The bulk of A$ gains should be behind us, with AUD/CNY
targeting CNY4.90 end-Q3 (USD/CNY CNY7.00 and AUD/USD $0.70). But equities will
continue to spark gyrations in AUD/CNY at times."
MNI London Bureau | +44 0203-865-3809 |
MNI London Bureau | +44 0203-865-3809 |