Aussie to regain its correlation with risk, but weaker fundamentals to weigh – Goldman Sachs

Analysts at Goldman Sachs are out with their take on the Chinese Dalian port coal imports ban and the Australian dollar, given the positive fundamentals.

Key Quotes:

On China's Dalian ports banning of Australian coal imports:

“Terms-of-trade impact should be short-lived.

Less than 10% of Australia’s coal exports to China go through Dalian ports equivalent to roughly 0.06% of GDP.

Import ban focuses on high-grade coking coal-which is more difficult to substitute than low-grade thermal coal-and Australia is the cheapest source likely limiting the ban's scope as a long-term policy.”

On fundamentals and currency:

Signs of progress on US-China trade negotiations.

Stronger-than-expected labor market report.

“We ultimately expect AUD to regain its correlation with risk but the weaker domestic cyclical picture excluding the latest employment data may also remain a headwind in the near-term.”