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The Australian and New Zealand Dollars were seen outperforming on global foreign exchange markets amidst growing hopes for a resolution to the U.S.-China trade war.
Broader global investor sentiment appears to have taken the driving wheel for the two antipodean currencies with a likely spark to the rally being a tweet by U.S. President Donald Trump in which he said he had a "very good" conversation with president Xi Jinping on the matter of trade.
The escalation in the U.S.-China trade war has for some time been a negative headwhind blowing against both AUD and NZD, therefore any hints of progress in resolving the matter are understandably interpreted as being positive for the two currencies by a wary market.
Trump tweeted: "Had a very good telephone conversation with President Xi of China. We will be having an extended meeting next week at the G-20 in Japan. Our respective teams will begin talks prior to our meeting."
Fuelling the feel-good factor was a tweet from the other side of the table, this time by Hu Xijin, the editor of China's Global Times:
"President Xi Jinping did agree to meet with US President Donald Trump at G20 and they will discuss fundamental issues in China-US relations. This phone call brings a slim hope to break the current deadlock between the two countries."
Xijin is widely seen as being a mouthpiece for the Chinese government, and his hints that there is potential for progress therefore will have been picked up by markets.
The Australian and New Zealand Dollars are seen as two of the most liquid proxy currencies for the 'trade war trade' - indeed, New Zealand and Australia's economies rely heavily on China which is their prime export market.
With China's economy slowing under the pressure of rising U.S. trade tariffs, any hope of progress on the trade war front would not only benefit China but its key trading partners too.
The Pound-to-Australian Dollar exchange rate went lower on the developments and trades at 1.8237 in mid-week markets, having opened the week at 1.8335. The Pound-to-New Zealand Dollar exchange rate now trades at 1.9237 having opened the week at 1.94.
"The dialogue between Trump and Xi Jinping has been a welcome surprise, especially for the Australian dollar and the Chinese yuan. Without any specific results, however, gains will be short-lived," says Marc-André Fongern at MAF Global Forex.
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