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Aussie steadies as volatility eases in wake of labour market softness

AUD - Australian Dollar

The Australian dollar traded in a very narrow range on Monday, bouncing between support at 0.6800 and resistance at 0.6830. With little headline macroeconomic data on hand to steer direction investors were happy stepping back to review and consolidate the recent retraction from 0.69 as attentions turn again to the US/China trade debate.

With the RBA’s November policy meeting and key labour market data behind us attentions again turn to broader global risk plays and the ongoing saga that is the US/China trade war. Hopes a preliminary trade deal may be reached were calmed through Monday as reports China were reluctant to sign any trade agreement without a commitment from President trump to roll back tariffs. The reports forced the AUD toward session lows, but with little substantive follow up investors hedged bets and largely absorbed the commentary as part of the general to and fro that shape the broader trade narrative.

We expect the AUD will stabilise through the coming days entering a tighter trading band with resistance firming on moves approaching 0.6830 and 0.6850. Attentions turn today's RBA policy meeting minutes for great insight and direction. While we aren’t expecting any surprises October’s employment data missed last week, reinforcing calls for at least one more cut before the end of quarter one 2020 and investors will be keenly attuned to any commentary within the minutes that points to the timing of further monetary policy loosening.

Key Movers

The US dollar edged marginally lower against both the Euro and Japanese yen on Monday as investors looked to diversify assets and shift toward haven currencies as reports intimate phase one of a US/China trade deal may be waylaid. China is looking for assurances the US will roll back tariffs prior to December 15th when the next round of Tariffs on Chinese goods are scheduled to take effect. The USD fell back below 109 against the yen, while the Euro jumped through 1.1050. The upturn in the single currency marks a 2 cent recovery from two year lows touched in early October, as optimism a trade deal will be struck have revived expectations for growth leading into 2020.That said, for the Euro to maintain any long term upturn key underlying indicators will need to point to improved and sustainable economic growth.

Sterling held above 1.30 through trade on Monday as the conservatives maintain a lead in the polls, bolstering expectations Boris Johnson will collect the majority needed to force through his Brexit withdrawal agreement. Attentions remain squarely affixed to election developments in shaping short term GBP direction.

Expected Ranges

AUD/USD: 0.6780 - 0.6830 ▼

AUD/EUR: 0.6100 - 0.6200 ▼

GBP/AUD: 1.8880 - 1.9080 ▲

AUD/NZD: 1.0610 - 1.0680 ▼

AUD/CAD: 0.8930 - 0.9030 ▼