AUD rebounds following promise of China stimulus

Daily Currency Update

The AUD tracked lower through the start of the week, extending toward intraday day lows south of US$0.6380, ahead of a key announcement from China’s Politburo. Having slipped below supports at US$0.6450 following last week’s softer-than-anticipated domestic GDP print, the AUD marked a series of lower lows through the back end of the week. Culminating in a break below US$0.64 following stronger-than-anticipated US non-farm payroll data for November released on Friday.

The AUD remained out of favour through the domestic session, unable to mount any meaningful push above US$0.6400. Enter China’s Politburo and an announcement following its December policy meeting. Officials signalled a move away from its current prudent monetary policy platform to a “moderately loose” framework, coupled with a more robust fiscal stimulus program. Policymakers promised to be more proactive and forceful in boosting consumption and shoring up the property market.

While short on detail, the announcement afforded investors welcome relief and hope China will actively support the economy and the impacts of Trump tariffs. The Chinese yuan lurched upward following the announcement, dragging the AUD back through US$0.6450 to mark intraday highs at US$0.6460. Our attention turns now to the RBA’s last policy meeting for 2024. We expect a few surprises and anticipate that policymakers will continue to sing from the same hymn sheet.