Westpac note that the "Australian dollar is...>

FOREX: Westpac note that the "Australian dollar is about flat against the US

dollar over the past 3 months, but the Chinese yuan has rallied about 3%.

Clearly the key factor has been the steady progress towards the US-China trade

deal which was finally signed last week. The trade deal offers only limited

tariff relief for China in exchange for a huge increase in purchases of US

exports, which doesn't seem overly bullish for the yuan. But China has at least

bought a period of trade truce with the US and if the US has a new president in

2021, the trade deal is likely to be scrapped. AUD has background support from

ongoing historically large trade surpluses, elevated equity prices and low

volatility. But sub-trend growth and muted inflation are keeping markets leaning

towards further RBA easing, which seems to be the main driver for AUD. Our base

case is for the RBA to cut the cash rate to 0.5% in Feb, followed later in the

year by another cut and QE. This outlook should keep AUD/CNY trending lower,

even if recent yuan gains might be somewhat excessive. Any recoveries to above

CNY4.80 are likely to fade, targeting the mid-CNY4.60s multi-week/month."