The AUD/USD drifted lower over November as progress towards achieving a Phase 1 US-China trade deal slowed, casting doubts on the likelihood of a deal in coming weeks. Some poor domestic economic data and heightened expectations of more RBA easing in coming months also added weight, notwithstanding the ‘unchanged’ RBA decision on November 5.

Amid US-China trade-related optimism, the AUD made its high for the month of 0.6928 on November 5, also the day the RBA left its cash rate at 0.75%.  Trade deal optimism gradually faded over the month, as negotiations became drawn out, taking the currency lower. It touched its low point for the month at 0.6754 during the last day of November, before ending at 0.6764, markets still left waiting on news of whether a trade deal would be agreed.  The 1.7 cents November range was the smallest since March.

The AUD/USD started the month at 0.6903, on the back of renewed optimism on US-China trade relations following the October 11 handshake announcement of a putative Phase 1 deal.  Early in the month, Chinese reports surfaced that a Phase 1 deal was likely to include a rollback in some existing tariffs; news that lifted the AUD/USD to its monthly high of 0.6928.  This move was soon unwound amid conflicting news reports from the US (e.g. president Trump saying he hadn’t yet agreed to any tariff roll-back). Without a confirmed deal, the limited news over the rest of the month saw the optimism on tariff rollbacks fade and the AUD/USD trend lower. Nevertheless, key negotiators on both sides continued to suggest gradual progress was being made despite the US Congress passing and then President Trump signing bills in support of HK.

Meanwhile, weak Australian labour market data (rise in unemployment to 5.3%from 5.2%) and downgraded economic and inflation forecast from the RBA in the November Statement on Monetary Policy weighed on the currency, even though the RBA appears unlikely to ease further this year. Late in the month, a sharp fall-back in oil prices amid news of imminent US self-sufficiency and news from OPEC + that it would delay production cuts put some further downward pressure on the AUD/USD. In combination with protracted US-China trade negotiations, these factors saw the AUD/USD touch a low of 0.6754 on 30 November. The currency ended the month at 0.6764, 1.3 cents below where it began and still in a downtrend. News of better China PMI data came too late in the month (Saturday November 30) to provide support.

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